LATHRUP VILLAGE, Mich. — Many CUs see a real cold spell in car loans during the winter months, but one credit union was able to jumpstart an auto lending heat wave in the midst of a cold snap.
Michigan First Credit Union here looked to break the ice that winter typically throws at auto lending by slashing a full percentage point off all of its auto loans and teamed up with local dealerships to spread the word. The results said both dealers and credit union alike were pretty astounding. After financing just 250 auto loans for a total of $3 million in January and February 2008, Michigan First hauled in about 700 loans this year totaling $11 million.
"Our loans typically will start to flatten out in December, January and February. Loan volume grew in those months for us, led by auto lending," said President/CEO Michael Poulos. "It was way beyond our expectations. On the first day of the promotion the phones lit up like crazy."
Breaking a national trend, the credit union also improved its used car to new car loan ratio as one in every four vehicles financed during the two-month period were new vehicles. That ratio stood at nine to one in 2008. Poulos said aggressive pricing by dealerships, severe restrictions on lending that captive auto finance companies have put in place and the near-cessation of leasing by several manufacturers led to the spike in new car sales as a large number of individuals who normally leased vehicles took advantage of Michigan First's loan discount and purchased a new car instead.
"Our dealerships are really, really hungry to sell cars and I think they made some significant discounts where some people in the rest of the country might not be doing that," he added. "We had a number of dealers contacting us for the very first time saying 'we need another financing option.'"
"Michigan First came in at the right time," said Sam Vitale, general manager for James Martin Chevrolet in Detroit, noting credit tightening at GMAC has made financing tough for potential customers. "Without them we would have been scrambling to find some more aggressive lenders with decent rates."
As an extra incentive, any customer purchasing a used vehicle that was not a GM employee or relative of an employee, received a $700 Visa gift card.
Vitale said about 50% to 60% of all sales in the last two months have been financed by Michigan First and while he is confident he could have found financing for many of those customers, there is no doubt that some would have walked away without a vehicle.
The dealer struck its partnership with the $486-million credit union a year ago after a potential customer could not get financing, even by GMAC, which was still being aggressive at that time. But when the customer returning with a loan from Michigan First, Vitale was interested and sought out the 82-year- old institution.
"It became a really strong relationship. They are loyal to us and we've been loyal to them," he added. "We've been able to convert some customers to some good members over there."
Uncertainty in the financial sector along with its willingness to lend in a tough environment has spurred a spike in Michigan First CU's membership both on the consumer and business side.
More than 1,000 people joined the credit union during the first leg of the financial meltdown in October, the first time Michigan First ever hit that benchmark. And the numbers keep piling up.
"We're ahead of our projections this year for growth. We added more members in the month of February than any time in our 82-year history," Poulous noted.
The credit union welcomed more than 1,300 new members last month.
