The program brings the credit union together with dealerships in the area so that members looking for a car will look to those specific dealerships first and the dealership will refer customers to Michigan First for financing.
"We started the program to get our members deals on purchasing automobiles by working with select reputable dealers in addition to getting a loan for the credit union," said CEO Michael Poulos.
As of now, the credit union has approximately 20 dealer partners spread across the credit unions local area. Michigan First is located in Lathrup Village and the dealerships spread from areas that include Eastpointe, Southfield, Detroit, Farmington Hills, Canton and Ferndale, Mich. All dealerships are listed on a Web site operated by the credit union about the program, www.michiganfirstcars.com.
Poulos said that they started to see the program really pick up when leasing options started to shrink and people began buying cars for the first time in a number of years while other lenders started tightening credit.
"Dealers started coming out of the woodwork to get involved in the program. We had to turn a number of dealers away."
The credit union evaluates the dealerships before it agrees to accept them into the program. Poulos said they go out and visit the dealership and examine it, meet with the management staff, do better business bureau checks and find out what the dealership will be able to offer to members.
Michigan First has a specific logo design that they give for their partner dealers to display at their dealership so members can look for it when they are shopping for a car.
James Martin Chevrolet in Detroit joined the preferred dealer program about a year ago, and Manager Sam Vitale said the timing could not have been better.
"We started in the program soon after GMAC started having issues. They all of a sudden weren't financing anything under a 700 credit score, and 80% of our business had been going to them," Vitale said.
The partnership started when a customer came into the dealership to purchase a used car and weren't able to get financing through GMAC. The customer was a Michigan First member and said they would look to the credit union for financing.
"We wrote it all up and then a representative from Michigan First called and said they were looking for a preferred dealer. We liked that they don't buy the credit score; they buy the person," Vitale said.
Over the past four months, Vitale said about half of their business has been going to Michigan First. Previously, no one other than GMAC had received that much of the dealership's business. Now that GMAC has started to become a little more aggressive, Vitale said that they've been referring about 30% of their business to the credit union. However, he said, even if things pick up for GMAC, the dealership will continue its partnership with the credit union.
"Not everybody will fit with GMAC, and they've pretty much come out and said that they don't want used vehicle business, so we will always use Michigan First for used car purchase and continue to use them when it makes the most sense for the customer."
Over January and February, Michigan First ran a promotion that offered one percentage point off car loan rates on particular cars based on credit history. With the first two months of the year typically being slow months for car sales and loans, Poulos said that the result of the promotion was fabulous.
Last February, Poulos said the credit union had 250 auto loans year-to-date and this February they had 700 auto loans year-to-date. In the first two months of the year, the credit union's auto loan portfolio grew from $3 million to $11 million.
Looking ahead at the rest of 2009, Poulos said he's not sure how General Motors and Chrysler will play out, but he thinks the market will continue to drive members to the credit union for loans.
"This program has worked extremely well for us. We've done more in vehicle loans than we have in real estate loans."
In terms of the economy, Poulos noted that Michigan was already an area that was struggling before the downturn, so members have already worked through a lot of the issues the rest of the country is now seeing.
The issues revolving around GM and Chrysler directly impact the people in the Michigan area, and Poulos said he's seeing a lot of people sitting on the sidelines, waiting to see what happens on the legislative level.
"I don't think our leaders in particular are giving us a great sense of optimism, so with a lot of people it's wait and see."
The next step for Michigan First is its yearly on-site car sales. The next one is being held in May with room for 320 cars at its headquarters. Typically, Poulos said they finance 50 to 70 cars over the two-day period.
This year the credit union is changing the sale slightly to ensure 80% of its vehicles for sale will be under $10,000.
"With the squeeze in the marketplace people are looking to invest a little less dollar into their vehicles," Poulos said.