Interest Rates on New Auto Loans Decline Among Credit Unions

New auto sales remained sluggish in the third quarter. Find out how interest rates on new auto loans compared with rates on other loans.

 
 

The average interest rate credit unions charged on new auto loans decreased from 5.62 percent in Dec. of 2003 to 5.47 percent in the third quarter of 2004. This number is based on the most common interest rate of the 5,763 credit unions reporting on their 5300 Call Report for new auto loans. This decline can partly be attributed to the low interest rate environment that credit unions have experienced over the past few years. However, sluggish new auto sales and alternative financing options from other institutions have also influenced the drop in rates.

With dealers and financing companies offering cash rebates, 0 percent APR financing and other incentives to entice consumers, credit unions have used low interest rates as one tactic in encouraging members to finance new automobile purchase through them. Efforts like these have resulted in credit unions increasing their new auto loans by $8.7 billion over the past year to $81.7 billion outstanding.

The following graph displays the average interest rate for new and used auto loans and all loans for the 5,763 credit unions that reported their most common new auto loan interest rate.

 

 

 

Jan. 3, 2005


Comments

 
 
 
  • Intersting article. What loan asset type showed the lowest net returns from 2001-2004 (net coupon minus losses and servicing costs)? That would be AUTO LOANS. What loan asset type are credit unions always trying to increase market share and pay up to do so? AUTO LOANS. If you're looking for one reason why CU ROA lags banks, here is a prime example. John Nilles RECU
    Anonymous
     
     
     
  • Do you have to belong (now or at any time) a credit union to finance an automobile. If you can, would the rate for a CU member be the same as for someone not a CU member? Thank you.
    Anonymous
     
     
     
  • Do you have to belong (now or at any time) a credit union to finance an automobile. If you can, would the rate for a CU member be the same as for someone not a CU member? Thank you.
    Anonymous