Credit unions are regaining share in auto lending.
During the recession and credit freeze, credit unions gained share when banks and even some captive finance companies pulled back on auto lending. Credit unions lost share when the captives and banks came back.
In 2012, credit unions were again on the rebound.
Credit unions accounted for 12.4 percent of new-vehicle loans made in the third quarter, up from 10.5 percent in the corresponding period of 2011, according to Experian Automotive. Credit unions accounted for 22 percent of used-vehicle loans, up slightly from 21.6 percent.
That was the fourth straight quarter of market-share gains. But there still are issues for credit unions to overcome.
For example, some critics don't like that on direct-to-consumer loans, credit unions may pay dealerships a small flat fee or even nothing at all on the loan itself. That's in contrast to an indirect loan negotiated at the dealership, where the dealership can earn dealer reserve.
Also, credit unions -- and other types of lenders -- can make it difficult to add aftermarket F&I products, by strictly limiting the amount they will lend vs. what the vehicle itself is worth.
Phil Maniaci, senior vice president of CUDL Automotive, said that some credit unions do offer indirect loans via dealerships, and some credit unions do pay dealer reserve. CUDL is Credit Union Direct Lending, Ontario, Calif.
CUDL in late 2012 passed 1 million new and used cars and trucks in dealer inventory listed on the site, an increase of more than 50 percent from a year earlier. It has more than 7,000 dealerships enrolled, an increase of about 1,000 in the same time frame.
A couple of dealership finance professionals who steer a lot of their business to credit unions say they have learned to like credit unions.
Bill Paschen, finance director for Jim Click Auto Group, Tucson, Ariz., said it's important to him that most credit unions are relatively small and local.
"They are where you are. They're local, at least most of the time. You can take a contract to their actual facility. With a big bank, you ship the contract off to an imaging center, they forward it to some funding center 15 states away," he said. "For our region, about 50 percent of our business clients walk in, and they're existing members of a particular credit union," he said.
Credit unions also can be more flexible on loans, Paschen said. "Credit unions in general are easier to deal with," he said.
Credit union customers also are loyal -- to their own credit union, said Ralph Larson, F&I director for Dick Hannah Dealerships in Vancouver, Wash.
He said credit union membership is nearly universal in his market. Larson said in a phone interview that he learned the hard way not to try to steer credit union members to another credit union, even if the other credit union offered the customer a better deal.
Larson said he discovered that when the customer's existing credit union found out their customer was financing another car with someone else, they would often beat the offer. Larson would lose the flat fee the dealership earned from the other credit union, but more importantly, it would also lose any aftermarket sales on the deal.
Instead, Larson started a policy of giving the credit union that financed the customer's trade-in the chance to match other offers. Charge-backs for canceled deals fell immediately, he said.
"The problem is, the customer's loyalty is deeper than a quarter-percent. They have their checking, their savings, their mortgage, at their credit union at work," Larson said. "They don't want to be placed at a different credit union they're not used to."