Outmaneuvering Dealers, Truliant FCU Scores with Zero-Rate Auto Loans

WINSTON-SALEM, N.C. -- How can credit unions compete with auto dealer's zero-financing offers? One way that's never been tried by CUs, according to officials at Truliant FCU here, is a program they conceived called the zero-rate loan.

Members using Truliant's zero-rate loan option essentially buy down the rate of the auto loan, financing all the interest up front, lowering the finance cost and the monthly payment, said Ryan Shell, TFCU's marketing communications supervisor. "People are keeping cars longer so it's becoming more important that auto loans become more affordable to our members."

Troy Martens, Truliant FCU loan manager, said the idea came about to directly compete with auto dealerships that advertise and push zero financing. Such zero-finance options are usually very restrictive, as the CU points out in a Web site set up to market the program at www.zerorateauto.com. The loan is available for both new and used cars, he said, and requires normal credit, in other words, no subprime loans allowed. Borrowers can expect to save as much as $1,200 in interest over the life of the loan. The maximum term is 60-months, and the highest amount per loan is $30,000.

"We've had very positive results so far," Martens said. "Fifteen percent of our total loan applications were for the zero-rate loan. In eight months, we've written 1,650 loans for $25 million, with an average loan amount of about $15,000. I believe this program is unique because I don't know of any other lender doing this."

Marketing behind the program to increase member awareness also proved successful, said Ginger Salt, TFCU's senior vice president of markets, an area that includes business development and community outreach. "We really put an emphasis on informing members about this so we used a multiple-front approach that included billboards, direct mail, print ads and even stickers for our frontline staff." That total marketing approach seems to have stuck, as Salt reported that ad awareness studies TFCU conducts through an outside vendor posted very high recall numbers.

Martens said that TFCU employees did not receive an incentive for the loans, yet said enthusiasm ran very high. "Our staff is really dedicated to providing the best possible service to members, and any time they can tell them about a way to save money, they get behind it. We strive to meet the financial needs of our members, it's that simple."

Truliant has no set limit on the amount available to the program. "We don't have a cap yet, but we're going to monitor the amount," he said. That way, Truliant can balance this program's stake in its total lending portfolio.

--cburger@cutimes.com