NEW YORK - On West 26th Street, in the Chelsea section of Manhattan, is a CU that specializes in automobile-related loans–to the tune of more than a half-million dollars each.
It’s a niche unique to big cities such as New York, taxi cab loans, and Montauk Credit Union has been making them for more than 40 years.
“One member stood up at an annual meeting and said if it wasn’t for the credit union 20 years ago he wouldn’t be in business,” said Louis Jimenez, Montauk treasurer and CEO. “This was a physician from Moscow who left the Soviet Union for religious reasons and bought his first cab with credit union financing. Today he owns around 20 New York taxicab medallions and is worth so much more as a taxicab owner than if he’d been a doctor.”
Medallion is the term for the license charged by the city to operate a cab. It’s good for as long as owners operate their taxi business and they’re transferrable. Medallions appear on the side of each New York City cab and cost $600,000 each, according to Jimenez. Often they’re issued in pairs, so loans usually come to more than $1.2 million for the license and the cars.
It’s a “solid” loan,” explained Jimenez, who said Montauk has “never written off a penny of principal” on any of its taxi medallion loans. “It’s also a regulated industry. So in the event a member defaults, we get paid off on these loans by the city within four to six weeks. It’s very low risk.”
The cars are the small piece of the loan, running a little over $30,000 for the popular Ford Crown Victoria after modifications. At press time Montauk’s rate for the car and the license was 5.5%, and the $80-million CU has $74 million tied up in taxi loans.
Creative Financing
Jimenez said financing can be “creative,” but most loans are three-year balloons with a 25-year amortization. Montauk also makes taxicab loans, to a lesser extent, in Philadelphia and Chicago through a brokerage arrangement, charging 7%.
With gas prices soaring, Jimenez believes the economy won’t have a significant impact on demand for the loans since the need for taxis in New York won’t go away. But the city’s effort to go green will force members to buy new vehicles.
The Green Apple?
“The city is going to a hybrid fleet, but not all vehicles come due at once. The program starts in 2009 and owners have about three years to phase in new models, which is close to the average life for a New York taxi. It may cost our members a little more for the hybrid cars.”
Not many financials, maybe 10 in the city, make taxicab loans, Jimenez said. And the loans are not the only unique aspect of Montauk, membership is by referral only. “You don’t have to be a taxi driver or immigrant, you just have to be referred to us by another member.”
Since taking over in 1991, Jimenez says the close-knit field of membership has helped him develop relationships with members, many of whom have thick accents and speak broken English.
“From time to time we will ask them to repeat themselves or they ask us to do the same,” Jimenez said. “But communication is very good. One of the most rewarding parts of my job is sitting down with members and listening to them tell me about how they got into the taxi business or raised their family by driving a cab.”
Like the story from a member who’s driven a cab for more than 20 years to put his children though some of the finest U.S. colleges.
“He’d come to me every three years to get checks for these schools,” Jimenez recalled. “The first time was for Duke’s law school and the second for UCLA’s medical college. The third time was for Northwestern. He got his children some of the best education this country offers by working with the credit union to take out taxi loans, doing some refinancing, and paying the loans down and paying them off. That’s what credit unions are about.”(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
