In the first half of this year, outstanding new-vehicle loans for credit unions were about $67.1 billion, he says. That represented an annualized growth rate of 10.2 percent compared with an actual increase of 8.6 percent for all of 2012 vs. 2011.
Schenk discussed credit unions' loan business last week with Automotive News Special Correspondent Jim Henry.
Credit union membership is growing.
It would be unusual, I think, if a consumer were not able to find a credit union they could join. ... It's much easier to join today than it has been in the past. After all, if nationally 98 million folks have joined credit unions, that's close to one-third of the population.
We're seeing a huge increase in membership. We figure the annual growth rate is approaching 2 percent, which is twice as fast as the population. ... A lot of folks have come in through automobile loans.
You're talking about somebody joining a credit union when he or she applies for a loan at a dealership, right? Can you put numbers on that?
That's definitely growing, but I don't have any statistics on that.
Are those direct-to-consumer loans, in which the dealership earns a flat fee, or are they indirect loans, in which the dealership gets dealer reserve?
It could be either.
Credit unions gained share when GM and Chrysler went through bankruptcy. The captives later regained share. How are credit unions doing now?
During the downturn we saw pretty significant declines in credit union new automobile loan originations and total outstanding. It was a reflection of what was going on in the marketplace.
Consumers had retreated en masse from the new automobile arena, given the uncertainty and the huge hits we were taking in the labor market. Those that really needed to buy a vehicle were concentrating in the used arena.
Our amount outstanding declined from something like 18 percent of total loans made by credit unions to only 11 percent of total loans. It mirrored what was going on in the entire auto industry.
But credit unions are back, right?
It is clear we're back. It is clear consumers recognize the credit union difference -- that is, we are not-for-profit cooperatives. We return our earnings to our members. That happens in a couple of ways, and one of the ways we give back those profits is through lower interest rates on loans.
How much lower?
According to a service we subscribe to that tracks rates, on a 60-month loan, assuming $30,000 financed, the average rate at credit unions was 2.73 percent vs. 3.98 percent at banks. Over the life of the loan that's about $1,000, and $1,000 is not chump change.
What about captive and factory incentives?
Not everybody qualifies. A lot of people came through the downturn with a bruised credit history. For a lot of folks, it is an issue. In an environment where there's so much uncertainty, it makes sense now more than ever to shop around.
Consumers should consider what the dealer is offering them but on an apples-to-apples basis. They should also consider what the neighborhood bank and what the credit union are willing to offer.
Why do credit unions have such low delinquencies?
Consumers are more likely to say they want local and smaller financial institutions. Credit union members say they pay their credit union loan first in order to maintain that membership.
I think it's also true that because we're member-owned, we're very careful about not saddling members with loans they can't afford. If you look at delinquencies and charge-off rates, mortgage brokers really were saddling people with mortgages that never should have been written.
With all of the business that we do, we're careful about who we loan to. That doesn't mean we choose only the best qualified. On the contrary, we tend to be smaller institutions, locally owned and controlled by the membership. We're more likely than the big national banks to sit down and hear our member's story.