CUs Should Stick to Principles in Auto Lending Pricing, Southwest Corporate Investment Adviser Says
It may not give them an edge over their competitors, but if credit unions stick to what they know when it comes to pricing for vehicle lending, it could pay off in the long run in building return and profits.
Brian Turner, director of advisory services at Southwest Corporate Investment Services, a wholly owned CUSO of Southwest Bridge Corporate Federal Credit Union, offered that suggestion as the industry grapples with record low new vehicle lending activity. It remains to be seen what the impact will be after Toyota and other Japan- headquartered auto manufacturers recently announced they may have to suspend production at plants in the United States in the aftermath of the earthquake and tsunami.
Turner said an adjustment in consumer behavior, especially in any economic downturn, may be among the reasons why credit unions are experiencing more activity on the used car lending side. Over the past 30 months, consumer credit has declined by $258 billion, he pointed out. As a result, the demand for loans had been adversely impacted.
"Consumers, impacted by a weak employment market and falling home prices, become more cautious with their money," Turner said. "This has caused them to defer most spending, especially on big ticket items [such as] autos, homes, appliances, electing to lower their household debt burden instead."