FERNDALE, Mich.-Credit Union ONE here plans to push auto loans all throughout the summer of 2013-even though some of those loans may not be fully paid off until the summer of 2020.
Steve Grech, EVP at the 105,000-member, $808 million credit union, said it plans to push an 84-month auto loan this summer, with rates as low as 2.25% for new vehicles and used cars from model year 2005 or newer.
The credit union is advertising the promotion via a variety of channels, including radio, its website and social media profiles.
"You have to remember, if you have historical data that suggests that even though it's an 84-month loan, those loans don't stay in the books for 84 months; that's critical in your lending strategy," said Grech.
As of its March 2013 Call Report, CU ONE has more than 26,000 auto loans on the books totaling nearly $351 million.
Consumers right now want affordability, said Grech, "but history shows that those loans don't stay on the books anywhere near 84 months. It's closer to three or four years that they stay on the books. You can put any type of premium you want for a longer turn, but in the long term it hurts your business because people want the payment release."
Grech said that even with the longer term, there is minimal risk for the credit union because consumers just want the lower payment, and appreciate the flexibility that allows them to put extra money toward the principle and has fewer restrictions on when they can trade in the vehicle.
"Our history has shown that if it's a 60-, 72- or 84-month loan, those don't stay on the books anywhere near that time."
