Dealership managers like J.T. Laughridge are a big reason credit unions are thriving in automotive lending.
In the past, Laughridge, general manager of Terry Reid Kia in Cartersville, Ga., didn't work with credit unions much. He turned to them only when trying to finance a customer with damaged credit. But all that changed in 2009 after banks clamped down on credit.
"When conventional lending started to tighten up, we were trying to stay in business and find places to take the loans," Laughridge said. "What we found is [credit unions] have stepped up their buying to pick up the slack. That's actually helped us immensely in our business."
Credit unions are emerging from the recession as winners. Collectively, they hold a higher portion of new and used auto loans. They are writing nearly a third of new loans. In the fourth quarter of 2008, credit unions financed more new loans than auto manufacturers' own captive lenders and have continued to do so in every quarter since, according to Experian Information Solutions Inc., which tracks lending data.
Instead of the old-school sniping that used to go on between credit unions and dealerships, the two are partnering more often. Much of the growth by credit unions has been in indirect lending, with loans facilitated in the dealership finance and insurance office by aggregators that have automated the process.
Many credit unions also have benefited by being more liberal in their lending practices. General Motors Co. even promoted other lenders, including credit unions, for a time after former captive GMAC Financial Services cut off all but the most credit-worthy customers in late 2008.