For credit unions looking for ways to increase loan volume, used car sales are an excellent vehicle. And the more credit union employees understand new car depreciation and how to help members maximize the value of used cars, the easier it will be to drive up loan volume.
With auto loans comprising 36% of their average portfolio in 2006, credit unions have a major stake in their members' automobile purchases. However, according to CUNA, credit unions lose seven of every 10 car loans when credit union members buy a vehicle from an independent or franchised dealer that also provides financing.
But credit unions offer members significant advantages. Working in the credit union members' favor is the fact that depreciation makes used cars a great value. Most vehicles lose 15 to 20% of their value each year, but the first year represents the greatest loss on a new car. In fact, the two-minute drive off the lot can cost some owners up to 15% of their new vehicle's value. This instant loss reflects the difference between the wholesale price–what the dealer pays–and the retail price–what the consumer pays.
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