Opinions Divided On Leasing's Real Value

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MAIMI-Experts are split on whether CUs should aggressively pursue auto leasing.

A number of sources interviewed by Credit Union Journal believe auto leasing is gaining popularity with consumers, particularly due to an increased focus on monthly payments. Yet others feel there is too much competition from manufacturers to make leasing worthwhile.

Activity on LeaseTrader.com indicates that consumers are starting to come back to leasing following a decline during the height of the recession. John Sternal, VP of LeaseTrader.com, reported leases represent 15% to 20% of all vehicles sold today. "That is up from 9% during the height of the recession. Before the recession, leasing represented about 30% of new vehicle sales."

Sternal attributed leasing's growth to a greater focus on the monthly budget. "We are finding that the majority of car shoppers in every demographic and age group are approaching a car purchase today with a fixed-income mentality, an outlook typically reserved for the retired and elderly. Because of that mindset, leasing is starting to win, because people can get more car for their money."

According to the Hauppauge, N.Y.-based GrooveCar, leasing is "taking off," said President David Jacobson. GrooveCar's CU Xpress Lease is generating $7-$16 million a month from five credit unions. "We have ten more CUs in the pipeline and are in talks CUs covering eight states. At Pinnacle FCU we've surpassed a targeted monthly goal of $1 million."

The $4-billion Teachers FCU in Farmingville, N.Y., is active in leasing and expects to continue, shared Nancy J. Orlando, SVP of credit. "But there is more competition in the market now with other players, like the captives, coming back. For period of time they had been out. But they are back."

That's the big concern, stressed Tony Boutelle, CEO of the Ontario, Calif.-based Credit Union Direct Lending (CUDL). "Leasing is a growing market, no doubt about that. However the reality some credit unions do not see is that today's leasing market is so different than any leasing market in the past. The captives totally dominate it. I don't see how credit unions see leasing as a big opportunity."

Boutelle added that CUDL will support its member credit unions who decide to go into leasing, but CUDL does not plan to make a big play in it now. "If Bank of America and GE Capital got out of leasing (due to captive financing) and I don't see them really getting back in, I'm not sure if I were a credit union that I'd want to get heavily into leasing."

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