HAGERSTOWN, Md.–One auto dealer is citing a reason that might surprise many in credit unions for the reason the dealership is doing more lending business with CUs.
“We used to do very little business with credit unions, but now we are doing a lot more than we’ve ever done. They don’t have their hands tied as much from the Consumer Financial Protection Bureau,” Paul Ritchie, president of Hagerstown Honda and Kia, told Auto Finance News
The publication reported that tight lending standards, decreasing vehicles sales, and a digital-savvy market has led the dealership to turn to credit unions to “pick up the slack.”
Auto Finance News reported that while the BCFP has loosened up some under Acting Director Mick Mulvaney’s leadership, the uncertainty with compliance under the Bureau has made traditional lenders too cautious and some lending standards too tight, with credit unions now “serving as a reasonable alternative.”
‘All-Time Low’
Ritchie told Auto Finance News that working with credit unions is where his dealerships are making the most money during a time when front-end profit on selling a car is at an all-time low.
“Honda used to sell about 2,300 cars a year,” he was quoted as saying. “Now, that’s scaled back a bit to 1,800 units sold a year.”
He said he has been able to make up some of those lost profits with service contracts.
“A lot of traditional banks put a limit on how much you can sell to a customer,” Ritchie told Auto Finance News, before adding, “However, credit unions are more flexible.”
Auto Finance News quoted Bob Child, chief operating officer with Ontario, Calif.-based CU Direct that although credit unions worry less about the BCFP, their lending standards are still high, allowing CUs to serve as an “additional channel of comparative lending,” by offering more options.
Ritchie also told Auto Finance News he has a preference for the lending technology at credit unions, which has expedited the loan process while remaining personable.