People consider buying a vehicle and borrowing money to do so as one event, making it crucial for credit unions to engage members early and often in the car-buying process.
That’s the word from Bob Child, chief of staff at CU Direct Corp., citing a study the company conducted earlier this year that examined consumers’ most recent car-buying experiences. He addressed the 19th annual CUNA Lending Council Conference in Phoenix.
“We need to get to consumers early and have better relationships with auto dealers to be successful in influencing their loan decisions,” Child says.
This will require providing information that helps consumers as they shop for vehicles, as well as making it easy to get loans on the spot.
Preapprovals are the key, for both the buyer’s and dealer’s convenience, according to Child.
He says auto sales growth rates have returned to normal: 9% for new vehicles and 4% for used vehicles in 2013.
And while some industry experts believe auto sales growth will fall next year to a respective 4% and 1% for new and used vehicles, Child cites a dealer group that believes auto sales growth in 2014 will mirror this year’s growth.
“We’re excited about that,” Child says.
The nation’s aging fleet of vehicles is fueling sales growth, according to Child. The average age of vehicles on the road is 10.9 years.
“There are a lot of car buyers in this group,” he says.
Other factors affecting auto lending in the coming months:
More rationality in lending: Approval rates for subprime loans has dropped substantially, “which bodes well for the industry,” Child says.
Longer loan terms, driven by rising car prices. The average purchase price for vehicles financed through CU Direct is $30,500. “Even with low rates, the payment for that amount is still high,” he says. That will make auto loan terms of 72 months and longer more common.
Higher rates for subprime borrowers to compensate for thin margins on loans to prime borrowers.
A question was recently posed to CUNA’s compliance staff about the Right to Financial Privacy Act. Specifically, what type of documentation is required from a federal government agency when it requests financial information on a member?