WASHINGTON—A new study shows that credit unions are beating banks by a healthy margin on new car lending rates.
The finding from the WalletHub 2014 Auto Financing Report is good news for CU executives, who recently indicated auto lending will be their biggest growth opportunity in 2015 (http://www.cutoday.info/Fresh-Today/Auto-Loans-Biggest-2015-Growth-Opportunity).
According to WalletHub, car manufacturers charge the lowest auto loan rates for new cars (40% below average), followed by credit unions (24% below average). National banks charge rates that are close to average, while regional banks charge the highest rates (40% above average).
In the fourth quarter of 2014, banks’ average new car rate was 4.31% APR, CUs 2.44% and captives 1.92%. Banks charged 5.12% for used, and credit unions 2.93%.
Both banks and credit unions have reduced their new car rates since Q1 2014, when banks stood at 4.39% and CUs 2.51%. Banks have raised their used rates slightly in that same period, moving to 5.12% from 5.03%. Credit unions dropped their used rates to 2.93% from 2.98%.
Meanwhile, the study also found that car manufacturers as a group are not very transparent about their leasing plans. WalletHub also explained that the average dealer markup for new car loans is 1.01 percentage points and the average markup for used car loans is 2.91 percentage points—a practice that costs consumers roughly $26 billion in additional interest over the life of their loans.
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