As credit unions paddle against a strong trickle into their auto portfolios, some are finding ways they believe will attract more borrowers.
TruWest Credit Union of Scottsdale, Arizona ($1.4 billion in assets, 93,502 members) announced a new program Friday designed to help members purchase certified new and used vehicles at discounted prices.
“Partnering with Costco to offer discounts on cars or trucks through preferred dealerships made perfect sense to us and we are thrilled to offer this service to our members,” said Farid Farbod, Vice -Senior President and Chief Lending Officer of TruWest. “Providing our members with opportunities to finance a home, a car or a small business is what we aim to excel at.”
Yet like 2,817 of the nation’s 5,175 credit unions reporting March 2021 data to the NCUA, TruWest’s auto portfolio has shrunk in the previous 12 months. TruWest is also among 2,651 credit unions whose total portfolios fell from March 2020 to March 2021.
TruWest punches above its weight in auto loans. It is the 289th largest credit union in the nation by assets, but it is 119th in new auto loans and 222nd in total auto loans.
But his numbers are down. It held $247.5 million in new car loans as of March 31, down 2% from March 2020. Used car loans fell 4% to $122.6 million.
Total loans decreased by 4.4% to $964.9 million. The $44 million decline in its total loan balance was more than due to the $84.1 million increase in secondary market mortgage sales over the previous 12 months, including an increase of $21.8 million in first quarter sales.
And that 78% increase in mortgage sales in the first quarter went a long way to explaining the 50% increase in its pre-expense operating profit, which helped explain its annualized return on average assets of 1. .09% in the first quarter, up 42 basis points from 2020. first quarter.
For all credit unions, first-quarter ROA was 1.04%, up 51 basis points.
And, with similar chains of effect, overall credit union ROA for the three months ending March 31 was at record highs, even as new auto loans fell 3% to $141.4 billion. and used auto loans rose 5.3% to $243.2 billion.
The liquidation of auto loans is accelerated by members using their increased savings to pay off their credit cards and then their auto loans. But the share of auto loans from credit unions has fallen slightly. This indicates that credit unions are losing loans to better competitors, their own higher lending standards, or some combination.
Cox Automotive reported Thursday that lenders, including credit unions, tightened credit standards from April to May after easing them for each of the previous three months. Its Dealertrack Auto Credit Availability Index was 97.7% in May, down 0.7% from April and tighter 1.5% from February 2020, the month before COVID-19 hit. be declared a pandemic.
TruWest is trying to attract more borrowers through its program with Costco. The program allows potential buyers to buy cars online through a link on truwest.org. They can also apply for a car loan and get pre-approved, which TruWest says can save borrowers time before heading to a dealership. Then, buyers can visit a Costco-approved dealership to view the car they’re interested in.
The service has free online calculators that display the loan amount based on the price of the car and the down payment.
Plus, when credit union members finance a car purchase through TruWest and complete a survey within 30 days, they’ll receive a $50 Costco Shop Card. If credit union members are not Costco members but purchase a car through the program and finance the purchase through TruWest while completing a survey, they will receive a free one-year paid Costco Gold membership.