WASHINGTON – Credit unions are still maintaining a healthy price advantage against banks with new auto loan rates, but the lending competitor on the block they should have their eye on is the captive financing company. Credit unions’ new auto loan rates came down 64 basis points the first six months of the year. Banks’ rates decreased 75 basis points during the same period. The current spread between credit unions’ and banks rates, according to Bankrate Monitor, is 130 basis points. In February 2001, according to CUNA, credit unions were charging 8% on 48-month new car loans, while banks were charging 8.4%. Five months later in July, credit unions were charging 7.5% and banks, 8.8%. CUNA’s Chief Economist Bill Hampel said the normal trend is about 100 basis points, “so there’s still a lot of norm to go,” he remarked. “Credit unions started out considerably lower than banks on average with their auto loan rates. Their rates are still much lower than banks’ rates, and they’re maintaining the point spread.” “Credit unions still have a healthy pricing advantage against banks with new auto loan rates,” assured CUNA’s Vice President of Economics Mike Schenk. “But the main competitor they’re facing these days head-to-head are the captive financing companies through the dealerships.” The key to credit unions competing effectively with captive financing companies is by educating members that when they’re at the dealership, “They should make sure that the financing decision and purchasing decision are two different acts and are kept separate,” advised Schenk. “When a dealer offers 9% financing, you can be rest assured they’ll make it up in the price of the vehicle,” he said. “Most members aren’t aware of this. They just hear a low financing rate and they jump at it. “It’s important to talk about the price of the car first and agree on that, then talk about financing. When that happens, it’s not difficult for most credit unions to compete with the rates the captive financing companies offer,” Schenk said. -

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