Statewide auto loan program fuels credit unions’ growth

BOULDER – Area credit unions have been cashing in through the member-owned Credit Union Direct Connect auto loan program as consumer car-buying picks up.

Premier Members Credit Union in Boulder grew 35 percent in membership in 2012, largely because of an uptick in lending through the statewide auto loan program Credit Union Direct Connect, said Carlos Pacheco, chief executive of the credit union.

Car loan customers must become members of the credit union they choose to get the interest rates offered by the program, which is owned by its credit union members. In the Boulder Valley, Boulder Municipal Employees Federal Credit Union in Boulder, Elevations Credit Union in Boulder, Community Financial Credit Union in Broomfield and Premier are members.

Credit Union Direct Connect gives traditionally smaller credit unions financial access to dealership showrooms “side-by-side with other financial institutions,” Pacheco said.

The Colorado company – made up of 34 credit union members – is a great way to help credit unions compete, interest rate-wise, alongside banks and car companies at the car dealership, said Tim Dore, executive director of Mountain West Credit Union Association, a trade group serving member credit unions in Arizona, Colorado and Wyoming. Credit Union Direct Connect was started in the 1990s by member credit unions to consolidate “back end” administrative services and help them be more competitive, Dore said.

Premier Members also uses the car loan program to market other offerings to potential customers, Pacheco said.

“This gives us an opportunity in the end to have the relationship that we started in the dealership showroom,” Pacheco said.

While interest rates change daily, Credit Union Direct Connect offers cheaper rates than banks do, said Marsha Marrier, a spokeswoman for Credit Union Direct Connect, quoting statistics from Informa Research Services Inc. a consumer market research firm in Calabasas, California. An average car loan of $30,000 from a commercial bank was 4.16 percent for a five-year loan, while the rate for the same amount from a credit union was 2.82 percent, Marrier said, quoting Informa. The 1.3 percent difference in rates would equate to $1,100 in customer savings over the life of the loan, she said.

Car loan rates also change according to a customer’s credit rating and loan terms, among other things, Marrier said. CUDC, based in Centennial, is one of at least two similar financial programs in the state. At car dealerships, banks often say they can offer more competitive rates because of their volume. Car manufacturers also often back low interest rates on car loans.

CUDC member credit unions in the Boulder Valley were offering a 2.99 percent interest rate to potential customers with the best credit histories through the state car loan program in the Oct. 15-31 time period.

The Credit Union Direct Connect program has been a good marketing tool for Community Financial Credit Union in Broomfield, said Greg Hill, chief executive. The number of loans Community Financial has made through the program has gone up annually in the last few years, he said, without giving specifics.

Member credit unions are “preferred lenders” with Sonic Automotive and AutoNation car dealerships across the country because of a partnership with the National Dealer Group Corporate Partnerships program, Marrier said. The national program offers additional incentives to car dealerships to offer the best rate credit unions have to potential buyers, Marrier said.

Member credit unions pay a fee equal to about 1 percent of an entire loan transaction into the program, Marrier said. Returns for member-owners have been strong in recent years, she said, without giving specific revenues. Book value at the company grew 11.6 percent in 2012 and is expected to grow 15 percent in 2013, she said.

While Boulder Valley Credit Union in Boulder doesn’t belong to the CU Direct Connect program, it also has seen good volume on auto loans in recent years, said Jason Bauer, vice president for communications and e-commerce at the credit union.

Boulder Valley Credit Union can offer auto loan interest rates as low as 1.99 percent for up to 66 months, Bauer said. Just as with other credit unions, BVCU offers discounts for customers with checking and direct deposit accounts as well as those who have other loans.

“This relationship pricing just deepens the relationship we have with our members,” Bauer said, “and allows us to offer a very low rate that competes with financing at dealerships.”

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