The Electric Ride
EUCLID, Ohio-The 2011 vehicle model year will mark the first in which numerous electric vehicles will begin rolling off assembly lines in earnest, with more mainstream cars such as the Chevy Volt, Nissan Leaf, and Ford Focus EV hitting the market.
But the excitement surrounding electric vehicles is matched by uncertainty by credit unions that will have to finance them.
Credit Union Journal spoke with over a dozen CUs across the country, including those along the green-conscious West Coast, and virtually all shared they had no current plans to establish special underwriting guidelines and policies for the eco-friendly cars.
The reasons, credit unions shared, stem from the fact member demand for the new-era autos has not arrived-and is not expected in the near term. Most CUs say they will wait for member demand to pick up before making any special underwriting decisions.
Other reasons for hesitancy by lenders include the lack of information about depreciation and resale values of the new electric cars, concerns over mainstream consumer acceptance, electric car warranties, and car battery life. As Fred Siegel, marketing manager at the $48-million Eaton Family CU here put it, "I'd rather address the matter of underwriting electric cars when there is demand for the cars. At this point there is a lot of buzz. But we have not heard much from our membership."
Electric cars may become popular and may eventually represent a significant portion of loan portfolios. But for now too many "unknowns" around electric cars exist, observed David Jacobson, president of GrooveCar, Hauppauge, N.Y. "A lot of things need to be clarified to determine what the sustained value of these cars will be over time."
Jacobson spoke with a number of his CU clients about their position on electric vehicles, finding many to be in a wait-and-see mode. But some CUs, Jacobson said, will handle the cars almost as unsecured loans. "Some will only take A and B credit. So if the member is strong enough to stand alone for the loan, then the collateral is almost secondary. "Joanne Steigerwald, AVP-lending at People's Alliance FCU told me that her credit union will accept only the top two credit tiers because of the unknowns about the electric vehicles."
Jacobson shared that Francis Collins, AVP-lending at Bethpage FCU in Bethpage, N.Y. is concerned about the government subsidies and manufacturer rebates on the cars could lower resale values. "Chris Penna, SVP at Nassau Financial (Westbury, N.Y.) told me the credit union would be hard pressed to extend significant financing, at least on a secured basis, on an unproven and possibly unsustainable collateral."
In Berkeley, Calif., the $85-million Cooperative Center FCU, despite partnering with ZENN Motor Co., a Toronto-based developer of the ZENN electric car, does not have special underwriting policies for the gas-free cars. CEO Gary Bell said the CU simply offers a .25-basis-point-reduction. "We would like to think that electric is the direction the auto industry is headed in. But that has yet to be determined. So until then we'll treat the electric cars like we treat any other fuel-efficient vehicle."
Mike Dorsett, SVP, lending and sales for the $580-million Kemba Financial CU in Gahanna, Ohio, does not expect a great deal of demand for the electric cars in the next year in the conservative Midwest. However, he said, "A good loan is a good loan. We don't make loans based upon the collateral as much as we do on the person, and electric cars won't be any different."