Credit unions, car dealers team up to boost sales
| Saturday, Nov 14 2009 12:00 PM
Last Updated Saturday, Nov 14 2009 12:00 PM
New vehicle loans by Kern-based credit unions
Lender ... October 2009 total (and market share) ... October 2008 total (and market share)
Kern Schools Federal Credit Union ... 63 (6.5%) ... 230 (16.3%)
AltaOne Federal Credit Union ... 45 (4.7%) ... 36 (2.6%)
Safe 1 Credit Union ... 29 (3.0%) ... 77 (5.5%)
Kern Federal Credit Union ... * ... 58 (4.1%)
Chevron Valley Credit Union ... * ... 7 (0.5%)
Kern Central Credit Union ... * ... 7 (0.5%)
NOTE: * signifies that the lender made five or fewer new vehicle loans in Kern that month
Source: Cross-Sell Reports
At a time of more pressing economic concerns, it went mostly unnoticed that for the first time in a quarter of a century, there was no big car sale in Bakersfield this year specifically for credit union members.
The decision not to stage such an event seems odd at first blush: 2009 new vehicle sales have been way off last year's totals, and so have auto loans by local credit unions. What better than a coordinated sales event to get things back on track?
First, it's not that simple. Second, there appears to be a good chance that the tradition will return as soon as next spring, to the benefit of lenders and dealers alike.
"We can both use the business," said Steve Renock, head of the county's largest financial institution, Kern Schools Federal Credit Union.
Shared benefits, divided costs
Cooperation has long been key to the sales, which typically take place twice a year and involve several Kern credit unions and new car dealers. For a period of usually about two weeks, credit unions lower their interest rates on new vehicle loans, and in exchange, dealers pay for advertising. In some cases, dealers also offer special discounts to credit union members.
But the promotions are not inexpensive, and lately there have been questions about how effective they might be in the current economic climate.
"We stopped doing credit union sales because of the economy," said Steve Downs, president and owner of North Bakersfield Toyota Scion and Bill Wright Toyota Scion. But he added that dealers hope to figure out how to "stir some business up around town."
Kern consumers have sharply cut back on new car purchases. Last month they bought a total of 1,034 new vehicles, which was 38 percent fewer than a year before, and 22 percent less than September's total, according to Cross-Sell Reports, a national provider of vehicle sales data.
Likewise, credit unions are generally making fewer car loans, which for some is a big part of their business. For example, Kern Schools made 63 loans in October, 72 percent fewer than it made a year before.
Credit union executives see several reasons for the recent decline in auto lending. For one thing, they have denied more people loans, either because their members' financial situations have worsened to the point that they no longer qualify or because they have had to tighten lending standards.
Beyond that, demand for loans is simply lower.
"Our members are borrowing less. That's the primary reason," said Doug Kileen, president and CEO of Safe 1 Credit Union, in Bakersfield.
Another big factor: Stiff competition from manufacturers' own lending arms.
"Zero (percent) financing is impossible for us to compete with," Kileen said.
What's more, some credit union members are turning to used cars.
"Right now we do more used car loans than new car loans," said Neil Sawyer, president and CEO of Chevron Valley Credit Union, in Bakersfield.
Going it alone
None of this has stopped individual credit unions from putting on their own promotions, complete with limited-time offers for reduced interest rates on car loans.
On Tuesday Safe 1 concluded a 30-day sale in which it lowered rates on new car loans to as low as 3.9 percent. The tally was about $10 million in loans, Kileen said, a result he called "very good for this economy." He noted that two years ago, a similar sale netted $28 million in new car loans.
Kern Schools is also planning a sale that would kick off shortly and extend for roughly six weeks.
Renock, the credit union's president and CEO, met Monday with members of the Bakersfield New Car Dealers Association to work out a cooperative agreement. For its part, Kern Schools intends to offer rates as low as 4.25 percent, Renock said, adding that the credit union would list the names of association dealers in its newsletter to members.
"We like car loans and we would like to do more of them," he said.
Association President John Pitre, general manager of Motor City Auto Center, said individual dealers likely will offer discounts to the credit union's members.
"It's a win-win for them and for us," he said.
