Credit Unions Drive Forward with Auto Loans

YOUNGSTOWN, Ohio – Even with dealerships in Pennsylvania shut down for more than a month by a state order, the auto loan segment at Mercer County Community Federal Credit Union is seeing what’s shaping up to be a great year, says CEO Sandi Carangi, with auto lending doubling over last year.

At 717 Credit Union, chief lending officer Bill Fulk says the institution’s new-car lending is up 25% year-over-year through the end of August and the credit union has already set a record for title loans completed in a year, crossing the 1,000 mark for the first time.

Some of that increase, he surmises, is because of the $1,200 federal stimulus check sent out in April and rates driven down by the pandemic.

And at Associated School Employees Credit Union, a soft start to the year rebounded over the summer.

“I think [the softening] was a result of some of the incentive programs from manufacturers at the end of the year” says Michael Kurish, CEO of ASECU. “We have arrangements with many of the local dealerships where the [credit union] member or prospective member can go purchase a car and at the point of purchase finance their loan through the credit union.”

Auto loans have long been a major part of credit union assets.

The National Credit Union Association’s most recent annual report states that auto lending made up 23.9% of assets at federally insured institutions in the fourth quarter of 2019, totaling $375.1 billion.

And, according to CUNA Mutual Group, a mutual insurance company for credit unions, outstanding balances on new-car loans at credit unions were down 3.5% in July, while used-car loan balances rose 1.3%.

“Auto sales have recovered most of the sales lost during the spring but the pace is still below the 16.5 million level considered a normal auto market,” CUNA Mutual said in its September trends report. “The pandemic has reduced the demand for public transportation and air travel, and so has increased the demand for personal mobility and therefore automobiles.”

Part of what’s driving that, Kurish says, is relationships between auto dealers and local credit unions, rather than members going to their credit union first and then to a dealership.

“One of the things we’ve been stressing over the past several years is that we want to build relationships with local merchants and people within our communities. I think they want to deal locally as well,” he says. “You may not see auto sales going up, but we’re getting a bigger piece of the pie.”

At Mercer County Community Federal Credit Union, Carangi says, much of the increase is due to technology. As part of the Credit Union Direct Lending program, car buyers can request their loan be through their credit union – and its rates – rather than through the automaker’s in-house financing organization.

“They can go to any dealer in the area, and say, ‘I want my loan to go through Mercer County Community Federal Credit Union,’ and they can submit the loan right to us online. That’s really helped it take off,” she says. “It all goes back to the embrace of technology and the convenience of it.”