Credit Unions Fend Off Rivals

Credit unions are trying to keep ground gained from a land rush of auto-financing business in 2008 and 2009, when other financial institutions weren't in a hurry to offer loans.

“We want to maintain the relationships we made then, show we're in auto lending for the long haul and keep the momentum going,” says Bill Meyer, communications chief for CUDL (Credit Union Direct Lending), a credit union-owned service group with 800 members and 6,200 dealer clients.

When the credit freeze hit and many banks and financing companies curtailed lending, dealers struggled to get floorplan loans for themselves and car loans for their customers.

In desperation, many dealers turned to credit unions for financing needs. In better shape than many of their counterparts, credit unions saw their auto-lending market share go from 16.9% in 2007 to 18.4% in 2008 to 22.2% in 2009.

“When so many lenders stepped back, we stepped forward,” Meyer says.

Some individual credit unions weren't in a position to pick up the extra business, but most did. Some were deluged and could only do so much.

Banks and auto makers' captive financing units that punted on auto lending last year now are playing offense, making attractive offers and trying to make up with auto dealers who had felt stiff-armed.

Those offerings have caused the credit unions' market share to slip this year, an expected consequence, CUDL President Tony Boutelle tells Ward's.

CUDL dropped from being the No.3 auto lender in 2009 to No.7 this year. GMAC went from No.7 last year to No.4 this year and Toyota Financial Services from No.4 to No.2. Chase Auto Finance has held the top spot for both years.

Banks have “come back aggressively,” Boutelle says. “They are trying to win back business.”

By their charter, credit unions are not in a position to offer the likes of 0% financing or venture too deep into subprime. But they are trying to stay competitive and leverage their recent lending history with dealers.

“Credit unions have established themselves as long-term consistent lenders that are there through thick and thin,” Meyer says. “With the return of the banks and captives, we're now in the thick of things.”

Boutelle adds: “Last year, we heard over and over from dealers that we kept them in business. In 2007, so many lenders were in the marketplace, dealers almost took them for granted. Now, there is a new appreciation and a realization that we need each other.”

His vow for the future: “We are going to be a big player in the auto space.”