SACRAMENTO, Calif.-To keep dealers in the fold and stack up against manufacturers' subvented rates, Schools Financial CU offers 0% financing.
The $1.4-billion credit union is not giving away money, just letting dealers buy down its standard auto loan rates to whatever level they need to get the deal done. Called the Flex-Rate program, SFCU sends a rate sheet monthly to dealers, and includes what it will cost-per-thousand-dollars to buy down the numbers.
"This way the dealer knows that with our credit union they can name their own rate, which allows them to structure a deal in a way that lets them win business," said Tim Marriott, VP-consumer lending. "This is the kind of thing needed when a customer is very focused on rate. The dealer has other ways to make money on the back end, like adjusting the car price."
Marriott would not share what dealer-cost-per-thousand is, but said Flex-Rate is helping the credit union increase market share even as banks drop their rates.
The CU's lowest rate is 4.5% APR for up to 48 months on A credit, and 4.74% out to 66 months. SFCU, which has a $341-million auto loan portfolio, is closing 300 to 400 indirect loans per month this year, with 10% being Flex-Rate. Marriott said the program allows dealers to advertise 0%, but many Flex-Rate deals come in at 1.9% or 2.9%.
"Dealers use the program in different ways," Marriott explained. "On a day-to-day basis, and for special promotions."
Flex-Rate is just another means to strengthen dealer relationships, on top of good service and fast funding, stressed Marriott, who said the credit union doesn't mind when dealers pay for 0%. "We like that. We get our money up front."
