By Jennifer Reed, SubPrime Auto Finance News Editor December 19, 2006
WESTLAKE VILLAGE, Calif. — Credit unions are becoming increasingly assertive in
the indirect-lending market as they simplify the process for dealers, according
to a recent J.D. Power and Associates study.
J.D. Power's 2006 Consumer Financing Satisfaction Study found that credit unions
are increasingly forming alliances with dealers to offer new-vehicle financing.
More specifically, credit union transactions now represent nearly 10 percent of
loans being issued in dealerships, up from almost 7 percent in 2005 and 3
percent in 2004.
In order to drive business, credit unions are offering more favorable rates
through indirect-lending channels, thanks in part to the tax advantages gained
from their nonprofit status, J.D. Power explained. In addition to offering
better rates, these financial institutions are also providing longer-term
loans.
"As the new-vehicle financing environment adjusts to increasing rates and
compressed margins, credit unions are positioning themselves as strong
competitors to the established captives, banks and independents, which is
underscored by the fact that credit unions have historically provided excellent
customer service through their very close, personal ties with their customers,"
explained David Lo, senior research manager of auto finance at J.D. Power.
"From the dealer perspective, credit unions are currently competing primarily on
their rates and terms," he continued. "Captive providers still have a
significant advantage in other offering-related areas, such as more competitive
