Rate Marketing, Balloon Loans Working Out

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HAUPPAUGE, N.Y.-Balloon loans, "rate marketing," and leasing can help credit unions compete with low new car rates.

A number of CUs working with GrooveCar are using the strategies effectively, said GrooveCar President David Jacobson. "Many of our credit unions are doing quite well with rate marketing. It allows you to put out a competitive A tier, and the B and C tiers offer better FICO spreads than many of the banks."

For example, if banks' A-plus tier is 720 and B is 700, CUs lower the B tier to a 680 or 690 FICO. "Credit unions don't realize that ten-point FICO score difference could put them in a sweet spot other lenders are not matching and really drive a lot of business."

Balloon loans are appealing to consumers now, as well, Jacobson said. "Right now Chrysler is conducive for a balloon product because the rebates are so large and the carmaker is not doing any leasing."

Jacobson said Jeep vehicles are the best target for balloon pricing. "The balloon works very well for Jeep vehicles since they have a large factory rebate without subvented financing or a lease program." For info: www.groovecar.com

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