PHOENIX (11/7/13)--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.
| Loan preapprovals are key for both borrowers and dealers, Bob Child, chief of staff at lending solutions provider CU Direct Corp., told attendees at CUNA Lending Council's 19th annual conference in Phoenix this week. He also noted it is important to have good working relationships with auto dealers. (Photo provided by CUNA)|
So says 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 said.
This will require providing information that helps consumers as they shop for vehicles, and making it easy to get loans on the spot.
Preapprovals are the key, for both the buyer's and dealer's convenience, Child said.
He noted auto sales growth rates have returned to normal: 9% for new vehicles and 4% for used vehicles in 2013.
And while some industry experts say auto sales growth will fall to 4% for new vehicles and 1% for used vehicles, he cited a dealer group that believes auto sales growth in 2014 will mirror this year's growth.
"We're excited about that," Child said, adding the nation's aging fleet of vehicles is fueling sales growth. The average age of vehicles on the road is 10.9 years, he said. "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 said.
- 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.