Is your credit union capitalizing on members auto buying needs? It’s a simple enough question, yet when it comes to finance options, are you going the distance? Aside from traditional auto loan financing, auto leasing is an area that continues to provide savings to members and much opportunity for credit unions. There is still a great amount of growth to experience as credit unions look to deliver additional options to members getting into new vehicles. Leasing should be part of this strategy.
The National Automotive Dealers Association (NADA) expects 16.7 million new vehicles sales to transpire in the U.S. this year. This forecast signals a healthy economy for auto buying. In auto leasing, the market continues to evolve as members embrace this finance option, often as their first choice. Record auto sales last year were helped greatly by a robust auto leasing market. In 2018, there will be more inventory, on popular vehicles, up for grabs. This is great news for credit unions looking to offer members more choices as manufacturer support for leasing will decrease on some of the most popular models. This really opens the market for credit unions who are looking to make a difference through auto leasing.
Here’s what you need to know about entering the auto leasing market, a great way to boost auto loan portfolios for the well-positioned credit union.
Location, location, location
This holds true, not just for real estate, but for auto leasing as well. In many urban regions of the U.S., leasing continues to outpace traditional financing for consumers looking to get into a new vehicle. If your credit union is in a region that is popular for leasing, and is not offering this financial option, why not? In most urban areas, leasing remains the first choice by consumers when looking for a new vehicle. It’s important to be competitive 100 percent of the time, not just in one financial category.
While millennials are well-known to prefer leasing over traditional financing, there are other generations who love this option as well. As the baby boomers retire, they are not leaving the workforce entirely, instead opting for shorter commutes or a move to the city. Their desire to be in a luxury vehicle without being tied to it for too long, also makes them the perfect demographic for leasing.
Benefits of Leasing
Understand the benefits of leasing from the members’ perspective. This is about the member, so make sure your credit union can adequately convey to the merits to members. As discussed above, members of all age groups will benefit from having this option. Here are a few benefits that members enjoy learning about:
- Lower monthly payments than traditional loans
- Maintenance is typically covered during lease term
- New vehicle every 3-4 years
- Lower down payment or no down payment
- Tax savings
- New cars satisfy demand for improved technology and safety
There are credit union-specific leasing resources that work to get your credit union ready to serve this market segment. Not all are created equal. Do your research to make sure it’s a good fit and that the vendor is available to work with you on an ongoing basis. It’s important to point out, there is a reduced amount of lender competition with leasing. Typically, there are manufacturer’s programs and a bank or two. With traditional retail financing, there’s the manufacturer and as many as 15 other banks and finance sources competing for the same business.
The Fine Print
For the credit union, partner with a leasing company that is experienced and will make you whole at the end of the lease cycle. An experienced leasing partner will manage the vehicles at lease-end to eliminate all the value risks associated with leasing.
Look at what a vendor is offering in their lease program. Here are few topics to ask about to avoid being surprised at the end of the lease:
- Wear and tear policies
- Making the credit union whole at the end of the lease
- How many lease cycles has the vendor been through with their current credit unions
- Support services
After a quick review of how your credit union wants to attract new members, make sure leasing is part of the equation.