Auto cash fast loan

Will auto lending crash, or get the green light?

The Fed's latest half-point cut in rates could jump-start credit union auto lending and credit unions' gross spreads and net income.

But what might steer more auto loans to credit unions, predicts CUNA economist Mike Schenk, may actually boost the competition they face from auto dealers. Quick Start

Auto lending is off to a quick start in 2001:

* Credit unions' new car loan balances gained 1.3% in January - the fastest monthly gain since October 2000 and the highest January peak in over a decade.

* Credit unions' used car loan balances also grew at 1.3% - their fastest gain since June 2000 and their highest January peak in five years.

These gains have allowed credit unions to shift assets out of lower-- yielding investments and helped push loan-to-share ratios up from 76.1% in January 2000 to nearly 80% today.

Slowdown Ahead

However, Schenk warns that credit unions should "brace for a slowdown." While it's true that car and light truck sales reached a record in 2000, the 2.8% growth was much slower than the 8.6% growth in1999.

"Consumer confidence in the economy is dipping, no matter how it's measured," explained Schenk, CUNA's Vice President of Economics & Statistics. "If confidence continues to fall, wary consumers are going to be spending less especially on big-ticket items." Fast-Moving Competition

If car-buying demand stalls, and dealers' inventory swells, "finance companies will do whatever they can to get rid of that extra inventory," Schenk observes. "So they will offer cash-back deals and lowrate financing -- both of which compete with the ability of credit unions to offer loans."

Credit unions should expect automakers to "up the ante even more," Schenk warns. "GM is already offering $500 discounts on 17 popular models - over and above its already low-rate loans and large rebates."

Credit Unions' Turn

"This makes it more important than ever for credit unions to educate members about the benefits of taking cash-back deals from car dealers," Schenk concludes. "A rebate, combined with a credit union loan, may be a better deal than the dealer's low-rate loan promotion."