OSHKOSH, Wis.-Cash in hand can be more attractive than a sub-2% rate, says CitizensFirst CU, which ran a cash-back promo that boosted auto lending by 252%.
During the fourth quarter last year just under $9 million was generated from a deal that blew away the CU's auto lending results from the same period a year prior. In 2011, CitizensFirst booked $3.5 million in auto lending during Q4 on 417 loans. Last year, with the cash-back deal, the credit union made 765 loans.
"We found that cash in hand is sometimes worth more to people than lower rate and lower payments," said CEO Kevin Ralofsky, who joined the credit union last June. "Auto loans were dropping off in the summer and we were behind goal. So we put our heads together and talked about what we could do."
The answer came quickly, and from the credit union's CUSO, which had developed the cash-back program to be offered soon to other credit unions. "We decided to test it ourselves," said Ralofsky.
The promotion was open to current and new members, and it applied to either new loans or refis, Standard rates remained, but the borrower earned an on-the-spot 1% cash rebate up to $500. Members who were not approved received $25 just for applying. CitizensFirst paid $75,278 in rebates, plus $2,761 to charities from $5 for every approved loan."
Members Like 'Flexibility'
Not every member took the cash back, because they had the option to take a rock-bottom rate. CitizensFirst matches competitors' rates, but would not include a cash-back rebate if the rate was below 2%.
"Members like the flexibility, they told us, having the choice about how they want to manage their auto finances. Some like the check-close a $30,000 loan and get a check for $300. Among those who qualified, some chose a sub-2% rate. Give members some choices and you will get more participants in an auto loan promotion."
Even with the rebates and stepped-up marketing that used TV, billboard, radio, and print, the $380-million credit union still maintained a net yield of more than 3% during the offer, said Ralofsky.
What helped pay for the extra marketing and rebates was the $380-million CitizensFirst turning away from indirect business. Ralofsky said the indirect market is extremely competitive here, with dealers getting 3%-4% reserve fees. "That's too much money to pay a dealer and make any money. We decided to give that money to our members and pay for more advertising."
The credit union is 90% loaned out, a good situation to face. Ralofsky said. However, that makes CitizensFirst very careful and targeted with its lending programs. "We have to be picky in how invest our money. I think we made the right decision here, and the results speak for themselves."
MORE@CUJOURNAL.COM
Subscribers can read related stories by going to www.cujournal.com and typing the following headlines into the search function:
DCCU's Sweepstakes Helps Drive A 10% Increase In Auto Lending
Women Target Of GLCU Auto Lending Promo
Lenders Aggressive, But Won't Go To 'Crazy Area'
