Loan Rate Is Discounted If Vehicle Is Fuel Efficient

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With the price of gasoline near or over $3 per gallon in many areas of the country, one credit union here is offering to discount the APR on its auto loans depending on the vehicle's mileage per gallon.

New Horizons Community Credit Union will cut its listed rate by 25 basis points on loans for vehicles that get 20 to 24 combined miles per gallon (MPG). For vehicles that get 25 MPG or better, the rate reduction is 50 basis points.

Steve Trigonoplos, New Horizons Community's vice president of lending, said members are asked when working up their loan application if they have identified the vehicle they want. The loan officer checks www.fueleconomy.gov for the car's mileage, and tells the member what the rate will be.

"Our lowest rate this week is 5.49% for 84 months for A+ paper. So, theoretically, the member could have a 4.99% fixed rate," he said.

According to Trigonoplos, the loan promotion began Sept. 8 and, although it is fairly new, he has seen "some results." He said the credit union still is in the process of getting the word out. New Horizons has put signs in the lobbies and at teller stations at its branches, has a notice on its website, and will spotlight the loan in the October newsletter. In addition, it has notified Credit Union Direct Lending (CUDL) and a Denver-area auto broker it works with.

Although the rate will be announced as being available for a limited time, Trigonoplos said it will be ongoing as long as fuel prices continue to be an issue. "There is no end date at this time; we just need to see how it is going. We will evaluate it on a weekly basis."

"The primary goal is to help the member," he continued. "I don't know about the rest of the nation, but Denver has a lot of SUVs (sport utility vehicles). Many people are trading in their SUVs. They want something fuel-efficient that will save them money. We want to help our members get out from under their SUVs, which cost $70 to $100 to fill up. Not only will members save money on gas with a more fuel-efficient car, they will get a lower rate."

In July 2004, The Credit Union Journal did a special report on the effect "high" gasoline prices might be having on the sales of trucks and SUVs.

At the time, the U.S. Energy Department reported the average national price for one gallon of regular grade unleaded gasoline was $1.89, or about 47 cents per gallon more than July 2003. The state with the highest average price was California at $2.20 per gallon. The least expensive gasoline was in the Gulf Coast region, with an average of $1.78.

As of Sept. 26, following a year-long run-up in crude oil prices plus recent supply disruptions thanks to Hurricanes Katrina and Rita, the Energy Department's average price was $2.80 per gallon, up 88.6 cents from the same week in 2004. California still held the dubious honor of leading the way at $2.94, with the Midwest the lowest region at $2.71.

Last year, the chief economist for the National Automobile Dealers Association said gas prices were not a major factor relative to the mix of vehicles being sold. This year, in Denver, Trigonoplos said dealers' lots are jammed with returned SUVs.

"We have been watching the price of gas and wondering what the tipping point would be," he said. "We thought it might be $2.50 per gallon, but that didn't have any effect. But, at $3 per gallon, someone with a Suburban and a 40-gallon tank says, 'Wow! That's $120 to fill up!'"

"We're just trying to offer the members a good benefit. We think this is what they are looking for."

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