Credit unions enjoyed being the last ones standing in the autolending market over the past year, but the competition has startedto come back full force.

Banks like Chase and Bank of America have started offeringaggressive loan rates that many credit unions can't compete with,and captive financers are trying to gain back market share.

To continue to hold the footing gained over the last year,credit unions need to get creative, continue to be aggressive andrely on the relationships built over the past year when they wereone of the only options available for vehicle loans.

Heritage Federal Credit Union in Newburgh, Ind., said that thedealerships in the area have expressed appreciation for theconsistency the credit union has shown over the years.

“We had a dealership that was running a promotion last week, andthe owner said he appreciated how we have always been consistent.We have been around in good times and don't bail in the bad times,”said Dean Pielemeier, chief lending officer.

Last year the credit union had a 39% increase in auto lendingover 2008. The credit union has an indirect lending program inplace but doesn't partner with a third-party vendor. Heritage has alist of preferred dealer partners it works with and recommends tomembers. The auto lending program at Heritage was listed byCallahan & Associates as one of the top 50 credit unionprograms in 2009.

Pielemeier said that in recent months the credit union has seennew auto lenders enter the area. Both Chase and Huntington Bank,neither of which have branches locally, have been offeringextremely low rates to penetrate the market.

“We're still holding our own. They'll be here short-term, andthey'll be gone. Dealers don't want hot and cold. They wantconsistency,” he added.

CEO Ruth Gaon said that the plan for 2010 is to continue beingconsistent and offering promotional events that were successful in2009. The credit union's main promotional event is its Heritage500. The promotion starts Memorial Day weekend with the Indy 500and runs six weeks. Last year, it brought the credit union $25million in auto loans.

Bob Bulkley, owner of Expressway Dodge, Chrysler and Jeep, oneof the dealerships Heritage works with, said that he relied on thecredit union to get his business through the recession.

“The past two years have offered a multitude of problems forevery automobile dealer in the United States. After surviving themanufacturer's dealership selection process, we faced an economythat had slowed to a painful pace. Our customers were unsure ofwhat to do, and many of our lenders chose to retain their fundsrather than invest in the American public. The key to our survivaland the well being of our customers was left to a few morecourageous lenders. One of those that reached the furthest wasHeritage Federal Credit Union. Heritage's lending practices werefair and consistent before the economic crunch and remain the sametoday as we begin our recovery.”

Tony Boutelle, president/CEO of indirect lending network CUDL,said dealers may remember that credit unions were there to lendduring the recession, but credit unions still need to becompetitive in order to continue to capture loans. Boutelle saidspecial pricing and preferred dealers help, but credit unions can'tand may not want to compete with lenders like Bank of America,which offers loans at 3%.

Boutelle said that he also thinks that the competitive ratesbeing offered right now will calm down and lenders will go back toreal pricing. He recommends that credit unions do a complete reviewand monitoring of their programs to make sure best practices arebeing implemented. “Given the distractions credit unions faced in2009 a complete review on loan programs should be completed.”

CUDL released a 2009 white paper to its credit union memberstitled “Marketing Auto Loans to Members” to highlight somesuggested best practices.

In 2009, the Invest in America program brought credit unions atotal of $3.5 billion in new auto loans, with 229,000 GM andChrysler cars and trucks sold. Dave Adams, CUcorp CEO, said that ifcredit unions can continue to capitalize on opportunities likeInvest in America, they can continue to gain market share.

Invest in America recently announced a new incentive programthat offers additional discounts to members in specific employeegroups. The Private Offer incentive provides members with $750 offa new GM vehicle in addition to other incentives.

“The market is full of opportunities, but it is also intenselycompetitive. With lenders coming back with 0% financing, this is ahuge opportunity for credit unions to be successful,” Adamssaid.

Overall, while there is expected to be some growth in the automarket this year, NAFCU Economist Tun Wai said that unless theeconomy turns around significantly, he doesn't anticipate hugegrowth.

Predictions for new car sales look negative, he said, acrossvarious regions. For used car sales, prediction are slightlybetter. Wai said there are certain regions that are very strong inused car sales and that he has heard reports of rising prices,which means demand is increasing and inventory is starting to comedown.

–[email protected]