PLEASANT GROVE, Utah — Family First FCU here is now more than a month into operating an auto sales lot next door to one of its branches.
The process has gone pretty smoothly according to the credit union, which told Credit Union Journal it does not need a license to sell vehicles in the state of Utah provided it limits itself solely to repossessed autos or lease returns.
"As long as we are selling only repos or lease returns — cars we have a contractual obligation on — we don't need a license," said Carin Maurer, chief financial officer.
One drawback to this rule, she noted, is Family First cannot accept trade-in vehicles from potential buyers.
The Orem, Utah-based credit union began operating the lot on Sept. 19. Previously, a third-party leasing company handled Family First's lease returns. However, that company went bankrupt in December, meaning at the start of this year lease returns began showing up on parking lots at the CU's branches. Maurer said Family First no longer is adding new lease contracts while it works the current leases off its books.
In the case of lease returns, the people who have existing leases must maintain insurance on the vehicles. Other vehicles are covered under Family First's bond.
The CU prices its resale vehicles by using the market value established by the National Automobile Dealers Association, which is causing reverse sticker shock.
"Unfortunately, most of the time we are taking losses [on the lease vehicles]," Maurer said. "Due to the economy, the residual value that was calculated three years ago is less now. The used car market has changed dramatically and values are a lot less now."
The new automobile lot — which Maurer said opened to large crowds — is a short-term fix until the CU has sold off its lease returns, she explained.
"At that point the lot will be used for repos, because every financial institution has repos, but there will be a lot fewer cars. The lot is adjacent to a branch, so we'll use the space for expanded parking."
The $168-million CU serves 25,000 members from seven branches.
