CENTENNIAL, Colo. -- Industry figures show that CU indirect auto lending may be making a comeback.
CU Direct Connect reported its highest indirect lending volume for the month of August. The Colorado CUSO funded over $126 million in indirect vehicle loans, the highest volume month since the CUSO was started in 2003. Also, Direct Connect data on their member credit unions' combined indirect auto portfolio from January 2008-August 2008 showed the yield on new members' loan average was approximately 31 basis points higher than for members who were already members at the time of the loan.
Bill Meyer, communications coordinator for California-based CUDL, said that research indicates that credit unions are using indirect lending to reach existing members at the dealership. In 2007, 35% of CUDL loans done at the dealership went to existing members, representing a 5% increase from 2006.
Meyer also pointed out that indirect loan delinquencies have decreased from the first quarter of 2008.
"The credit unions are addressing their members' needs by responding to shifts in the market," said Steve Anderson, CU Direct Connect president/CEO. "Auto sales are down, but members are still purchasing vehicles--particularly used vehicles. Credit unions can help serve their members with auto loans that are priced appropriately and have responsible underwriting guidelines in place."
Analysis of rate, origination and dealer fees and projected charge-offs based on past performance showed that overall from January 2008-August 2008 CU Direct Connect's indirect auto portfolio has an expected average yield of 5.52%.
Looking at September, marketing manager for CU Direct Connect Carrie Helmers said that they are expecting to have funded over $150 million indirect vehicle loans in Colorado.
"Credit unions have a more personal and conservative approach to lending than the large banks on Wall Street. In Colorado, this approach is paying off," Helmers said.