TAMPA, Fla. - As credit-market stresses move from mortgages and credit cards to auto loans, some members here struggling to make their car payments are finding it easier to simply walk into the credit union and drop off their keys.
“It’s escalated a bit in the last six months,” said Ed Gallagly, CEO of the $225-million Florida Central CU here. “Some members are coming in good faith and asking for voluntary repos saying they can’t make the payment anymore,” he said.
Gallagly said that although the credit union doesn’t have an exceptional number of repos on hand, the current number of repossessed vehicles is about twice as much as he would expect in a normal year. Gallagly attributes the rising delinquencies and surge in repos to the economic downturn.
Florida Central CU isn’t alone. The percentage of delinquencies on auto loans has followed a four-year increase. At the end of the third quarter of 2007, delinquencies on indirect auto loans hit 2.86%, the highest they’ve been since 1991, according to a report on www.special-finance.com. Delinquencies on direct auto loans (those that were at least 30 days overdue) were also up in Q3 2007 standing at 1.81% but were slightly lower year over year.
Manheim Consulting, which analyzes the used-car market, estimated in a January report that there were 1.51 million new and used repossessed vehicles in 2007–a 10% increase over the previous year.
In an effort to keep repossessed vehicles from accumulating at the credit union, some credit unions will advertise autos on the CU website. Florida Central currently has four cars advertised along with photos and specifications.
Gallagly said the CU has a total of 21 vehicles on hand that it is trying to sell.
Some analysts advocate that credit unions aggregate their volumes to leverage their positions on the lending side and quickly liquidate the repos in their possession.
“If 10 or 12 credit unions got together and brought their cars to run (at auction) at one time, you’re going to be in a better position in the auction lanes and have more buyers looking at those vehicles,” said Jon Schrock, national accounts director for Manheim.com.
Schrock said that CUs may want to look to professional third party remarketing companies or to Internet site such as OVE.com, a wholesale vehicle exchange site, to help liquidate their stock.
Schrock, Gallagly and others said the best policy is to keep members in their vehicles by working with those who are most credit worthy and up to date on their payments.
“We’ll do anything we can to prevent repos, even rewriting loans or extending terms if the member is current on payments but it’s on a case-by-case basis.” said Kathy Johnson, VP lending at Airforce FCU.
NAFCU Reports On Vehicle Loans
Vehicle loans at credit unions totaled $181.9 billion at the end of January, comprising 33% of total loan volume, according to a NAFCU report. Expectations for both new- and used-vehicle loan demand were negative, with three of five regions expecting a weaker demand over the next 12 months in both categories. All of the five regions were expecting a decline in new-vehicle loan demand and only one region was expecting an increase in used vehicle loans (Region 2), according to NAFCU.
For More Information
www.cudl.com
www.walkawayprotection.com
www.special-finance.com
www.manheimconsulting.com
www.floridacentralcu.com
www.nafcu.com
www.airforcefcu.com
