SAN ANTONIO - Like a completely new auto line, there is little doubt the dynamics of the auto lending market in 2009 are different than any previous model year.
Mark Hein, CEO of the credit union division for San Antonio-based SWBC, noted that the federal government's Cash For Clunkers, combined with CUCorp's Invest in America program, which was rolled out earlier this year to offer vehicle discounts in conjunction with General Motors and Chrysler, "might have brought credit unions some new business, but they helped dealers more than anything.
"A lot of our credit unions saw an uptick in business even before Clunkers because many of the traditional lenders in the auto space have pulled back their lending and made underwriting requirements much stricter," Hein told Credit Union Journal. "Credit unions became a better option, and they benefited from all the press attention paid to the problems in the banking industry."
What Clunkers has done is taken a lot of used cars off the market, and therefore has increased the value of the remaining used cars in the market, Hein said. This in turn has made CUs' loan portfolios more stable. "The cash value for vehicles is higher than it was three or four months ago, so the deficit balance is less."
SWBC is seeing many credit unions take a look at point-of-sale products, such as GAP, credit insurance and extended warranties on vehicles, which Hein said are the primary fee income generating insurance products CUs are selling today.
"If credit unions are not making as much on their loans, what they need to be able to do is increase the amount of fee income to replace that spread," he said. "Selling these products will help."
SWBC has created "Insurance Partners," a program that offers home and auto insurance to credit union members. Approximately two-dozen CUs have signed up for the program, he said.
"Most credit unions that have gone down this path know it is not a panacea for income, but it is a very good member retention tool. It is not a savior for the bottom line, but if credit unions maintain relationships with members and make those relationships deeper, that is a lot better than trying to find new members."
