TAMPA, Fla.-One credit union is getting ahead of what it expects will some day be a wave of electric car loans, offering financing now for the rechargeable vehicles.
GTE FCU has made 11 loans to finance electric cars in two months since it introduced its offer, all going to a local electric car dealership that needed financing support.
"These are full electric vehicles, not hybrids, and we see it as the next wave of auto lending," said Brian Best, chief lending officer. "The demand is not there now. But it will come and get bigger as more people want to go the route that not only saves the environment but their wallet as well. Besides reduced fuel costs there is lower wear-and-tear because there are less moving parts in fully electric vehicles."
Best admitted he was surprised at the initial response. "I did not really know what to expect or how to assess demand for the vehicles. We conducted research before we offered the loans and we found there are a lot of people looking to find a better, green alternative to get to and from work. But what we also found is that consumers are putting up a barrier to purchasing electric vehicles, because they don't think the cars go far enough on a charge."
But GTE's research also shows that people do not drive as far as they think they do each day. So as electric cars are on the market longer, Best believes consumers will become more aware of that fact, and become more likely to shop for an electric vehicle. "That is the interesting thing about the potential appeal of the electric car," said Best. "Research shows the typical consumer drives 30 to 33 miles a day. The demand will be here."
Away Wheego
While GTE FCU will make loans for any electric car a member is seeking to finance, so far it has only made loans through a local Wheego dealership. The Wheego models go about 80 to 100 miles on a single charge and cost from $25,000 to $33,000-about the average price of a new car. However the warranty on electric cars is longer, Best said.
GTE is doing its part to educate consumers and members on the performance and benefits of electric cars, and held a session on the new vehicles at its recent Memberfest that was attended by more than 900 people. The credit union has information on its website and is planning some limited advertising. It has information on GTE and its financing inside the Wheego dealership.
What the credit union's market research also shows is that most financial institutions are not doing research on electric cars, which Best feels at least in the short run will separate GTE from others. "What we typically saw from other lenders making electric vehicle loans is reduced loan terms, higher interest rates, and a higher decline rate due to uncertainty around these new cars. But it really is a perceived fear from lenders caused by them not doing due diligence.
GTE, Best said, did its homework. "There are four primary manufacturers of electric vehicles and we talked with each one." Best said GTE learned that the carmakers put the electric vehicles through extensive safety and reliance testing, and the information is available to the public.
"We assessed the collateral risk, and that risk is what happens if the cars have some major fault and do not work down the road," Best said. "Now you may have a walk-away."
Not Concerned About Risk
But Best said GTE does not think that risk is high, with excellent extended warranties on the market and manufacturer warranties on the electric cars now longer than warranties on a standard car, in an effort to back the new technology.
GTE has such confidence in electric cars that it is offering its standard auto loan rates, which are very low, starting at 1.99% APR for the best credit up to 60 months. Best said he believes sub-2% rates are needed now by CUs to compete for any car loan, and that with such low deposit rates the spread makes even a very low rate still the best investment for a credit union.
Another big reason for the electric loan is to support environmental sustainability, a core GTE value, Best said. Yet, despite that reason for putting its toe into the electric loan market, Best said the move will be good for the credit union's bottom line. "This is a business opportunity for sure."
