RANCHO CUCAMONGA, Calif. — Credit unions are pricing their auto loans too low, losing out on an opportunity to earn interest income in a difficult yield environment.
So says CUDL Executive Vice President Jerry Neemann, pointing out the most surprising statistic from the indirect lending CUSO's recently released Business Intelligence Report.
"The one piece that stuck out to me was the rate differential between credit unions and captive and bank sources. Credit unions talk about how difficult it is with the yields being the way they are, but when you look at national averages, it appears that credit unions are leaving some rate opportunities on the table," Neemann said.
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According to 2006 Experian figures, the average rate for a credit union auto loan was 8.12%. In comparison, banks averaged 9.89% and captives averaged 10.81%.
"Are credit unions monitoring bank and captive rates from a competitive aspect on a consistent basis? I can see being lower, but two basis points is too much in this rate environment. It appears, on a nationwide level, that we are underpricing our loans relative to the marketplace," Neemann said.
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