When it comes to fighting for auto loans in northeastern Iowa, John Deere Community Credit Union is as tough as the tractors the manufacturer rolls out.

"They're a strong competitor," acknowledges Charles Laipple, a vice president with Mercantile Bank of Northern Iowa.

John Deere, Waterloo, does it with a program that lets customers apply for financing at the dealership and promises to approve or deny the application in a blistering 10 minutes.

The program is "very important for us," said Michael Harvey, executive vice president of the $320 million-asset credit union, which has 63,000 customers in a community of 120,000. Without the fast service, he said, "many of our members would've gotten financing somewhere else."

Big Part of Business

Loans generated by the program currently stand at $40 million, about a quarter of the credit union's $170 million portfolio. The credit union has about $90 million in total auto loans, Mr. Harvey said.

Loans from the program, known as point-of-purchase financing, have topped off because on average they turn over in less than 24 months, he said.

The credit union's auto loan portfolio was $15.2 million in 1987, the program's first year, according to data from Callahan & Associates, a consulting firm. For 1988 it more than doubled to $33.1 million, with $23 million from the point-of-purchase loans, Mr. Harvey said.

In 1989 loans outstanding through the program totaled $33 million; in 1990, $39 million.

Income figures for the program were not immediately available, he said, but the program makes a "significant" contribution to the bottom line.

Same Delinquency Rate

Mr. Harvey said there is no rise in delinquency when comparing indirect auto loans to direct auto loans. For 1993 the credit union's delinquency rate was 0.35%, well below the industry average of 1%.

Bankers in town said the credit union is tough to beat.

"When I drop my rates, I turn around three days later and see they've dropped theirs three-quarters of a point below mine," said Mr. Laipple of $360 million-asset Mercantile Bank.

Mr. Laipple said Mercantile and John Deere are "neck-and-neck" in competing for auto loans, and estimated that each held roughly 40% of the market. To compete, Mercantile offers special programs, such as cash discounts to customers with prior loans at the bank.

Mercantile has just over $100 million in auto loans, with $60 million from indirect lending programs with about 50 dealers.

Competition Acknowledged

"John Deere is a big player," said Joseph Steil, vice president of retail lending at $500 million-asset National Bank of Waterloo, the city's largest bank.

Credit bureau reports bear this out, he said. In April, John Deere held the liens of 31% of all the new cars in Blackhawk County, compared to 13% each for National and Mercantile.

Jack Hoover, finance manager of Reed Cadillac Oldsmobile, said John Deere became a power by going to financing through dealers.

"Back in the early 1980s John Deere only did business with members directly," he said. "But ever since they started going to the dealers they've really grown."

A survey the credit union conducted in 1986 found it was losing auto loans because customers were financing cars at dealerships, Mr. Harvey said.

Dealers Do Paperwork

Under the program, a credit union customer can request financing at any of 25 dealerships. The dealership fills out the application, and faxes it to the credit union.

The credit union pays dealers for the processing based on the size of the loan, Mr. Harvey said. If the customer needs $12,000 financing, for example, the credit union reimburses the dealer $100.

Mr. Hoover said dealers can make more revenue by financing for banks, but it's good business to work with the credit union because of its size.

"We could fight them (the credit union), but this way we don't ruffle any feathers and we create a sense of trust" with customers, Mr. Hoover said.

Mr. Harvey said the program has helped bring back members who were turning to banks for auto loans.

"It's important to us because our members told us the reason they were getting financing from someone else was because of convenience," he said. "We needed to regain our share of auto loans, and we have."

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