Riding Used Car Wave, CUs Revive Residual Financing
With a year-long track record of strong portfolio performance, used car loans continue to rev up a turbo boost for many credit unions.
So much so that some are seeking nontraditional methods to keep the lending momentum going. Among them, leases and balloon loans, which advocates say can bring in higher yields than traditional financing and potentially offer more savings for members on their monthly payments. Typically referred to as residual financing, the program requires less of a down payment, shorter loan terms and more options at the end of the term.
Members of the $898 million Corning Credit Union who have opted for a lease or a balloon payment have been a pretty loyal group to residual financing, said David Walker, vice president of lending. Years ago, the Corning, N.Y.-based cooperative offered such a program though a company that eventually went out of business. After a period of dormancy, members started asking for the financing option again.
“We found that members who are used to leasing or balloons keep coming back to them,” Walker said.