Ohio group hops on leasing bandwagon.

Until early this year, customers of Fairborn, Ohio-based Wright-Patt Credit Union had to look elsewhere if they wanted to lease a vehicle.

Not any more. In June, Wright-Patt -- the Buckeye State's largest credit union, with $400 million in assets -- and 14 other Ohio credit unions formed XU Lease, a cooperative, third-party vendor.

Now, customers who don't want to own a car can go to the credit union, which will finance a vehicle's lease.

"Our members have been leasing cars for years," from other institutions, said Harold D. Vance, president of Wright-Patt. "We want to do what we can do offer the service."

Nationwide Trend

Wright-Patt and other Ohio credit unions are among the many groups across the country making the leap into leasing.

Credit unions have only a small slice of the $40 billion leasing business, but that will change as more o them move into the business, analysts say.

CU LEase makes about six lease deals a day, and last month brought in $2 million of leasing business, said Gary G, Gores, president of the Ohio Credit Union League.

"There's massive interest in getting into leasing," said Arthur Spinella, vice president of CNW Marketing/Research, Bandon, Ore. "Credit unions have finally decided to compete."

Indeed, the competition is stiff. Automobile finance companies dominate the market, with an 85% share. Banks, credit unions, and other financial institutions split the rest of the pie.

Last year, just 3% of credit unions, representing 11% of the industry's 65.4 million customers, offered leasing, according to the Credit Union National Association, Madison, Wis.

But the market is growing. A CNW survey shows that 26% of all consumers lease new cars, 1998, 40% of consumers will lease, the survey reported.

By the end of 1993, vehicle leasing will be a $40 billion business, with credit unions holding a $1.2 billion chunk, Mr. Spinella said.

William F. Hampel Jr., CUNA's chief economist, estimates that 5% of credit unions, representing about 20% of the industry's customers, will offer auto leasing services by the end of this year.

Mr. Spinella said credit unions can fill a niche between automobile finance companies, which dominate the 24-month lease market with low rates, and banks, which focus on longer term leases for high-end cars.

He said credit unions should offer 36-month leases for non-luxury cars, as well as 42- and 48-month leases.

By filling this void, credit unions could snap up 20% of the market share within several years, Mr. Spinella said.

Making leases is more profitable than lending, said Terry Bowdler, president of San Diego-based C.U. Leasing, which serves four institutions in California.

Mr. Bowdler said people who lease cars typically lease more expensive models. The average dollar value for a lease is $20,000, compared with $12,000 to $14,000 for an auto loan, he said. The interest earned per transaction is 30% higher for leased vehicles.

Mr. Spinella warns that credit unions should be prepared before jumping into leasing. Underwriting is more complicated for leases than for loans, he said. There is also the added risk of not being able to sell a car at a fair price when the lease expires.

These two factors have kept credit unions out of the business so far. But not for long, Mr. Bowdler said.

Seven years ago credit unions "didn't have a clue" about mortgage lending, he said. "But that's all changed. And seven years from now, that should be the case with vehicle leasing."

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