Credit Unions See the Hybrid Wave Coming; Position Themselves to Meet Loan Demand

EL MONTE, Calif. – If you can’t drive home with a hybrid car from the largest auto dealership in the country, you probably can’t find one anywhere. At Longo Toyota, President Tom Rudnai said his dealership, the largest in the country, currently has a three-month waiting list for the Toyota Prius, and a slightly shorter waiting list for the Lexus RX400H hybrid SUV. “We have a few hybrid Highlanders, but you’ll probably have to wait a little bit to get exactly what you want,” Rudnai said. The auto dealer said the Prius has always had a waiting list, but recent events have increased demand. “It’s always been popular, but with fuel prices increasing, and the approval to drive hybrids in the HOV lane, it’s increased popularity even more,” he said. Rudnai’s reference to the high occupancy vehicle (HOV) lane pertains to a recent California state law that permits drivers of hybrid vehicles to drive in the carpool lane, even if they are the only occupants of the car. Considering how congested California freeways are in metro areas like Los Angeles, San Diego, Sacramento and the San Francisco Bay area, the new law presents a significant incentive for commuters to purchase a hybrid vehicle.Because hybrid vehicles are fuel efficient, they complement the credit union philosophy of thrift. Credit unions are beginning to offer special hybrid loans to its membership. At Mennonite Financial Federal Credit Union, Lancaster, Pa., the need for a hybrid auto loan program answered a higher calling. The faith-based credit union extends membership to Mennonites, Amish, and related Anabaptist faiths across the country.An important component of those faiths is the philosophy of stewardship, or responsible management of property, finances and personal affairs. “For us, it would include taking good care of the environment,” said Mennonite Financial President & CEO Larry Miller. The credit union offers a 1% discount for hybrid vehicles off its regular auto loan rate, which is currently as low as 5.5% APR. “By offering the discount, we’re encouraging members to think about a hybrid from the standpoint of saving our environment and good stewardship,” Miller said. Although the $70-million credit union has only made a half dozen hybrid loans since the program was introduced one year ago, Miller said he will continue to offer the discount to his 8,500 members. “It’s the kind of message we want to send,” he said. The credit union also provides links to educational hybrid Web sites on its own Web site, which Miller said he feels is an important part of the program. At NW Preferred Federal Credit Union, Tigerd, Ore., members who book a hybrid auto loan not only receive a special rate as low as 3.99% APR, they receive an iPod shuffle as a premium item. According to Vice President of Marketing Jim Hier, the hybrid loan is the first in the $93-million institution’s planned suite of green loans. “We looked at the motivating factors, and particularly in the state of Oregon, people tend to be environmentally conscious,” Hier said, adding, “It was more a sense of doing something good for the environment, and not necessarily to save on gas costs.” The VP said he is surprised that the loan has not had many takers so far.NW Preferred began offering the loan in May, and has booked fewer than 10 so far. Hier said he suspects a few reasons for the less than desired results. First, dealers are currently reporting waiting lists up to three months for hybrid vehicles. Secondly, hybrid vehicles are not the kind of vehicle purchased on a whim. “I think it’s not as immediate a purchase as most automobiles,” Hier said. Finally, Hier recalled a change in attitudes toward hybrid vehicles over the past year. During the first few months of 2005, gas prices were high and hybrid vehicles were popular. Then in early summer, “right around the time we launched the loan,” Hier said, gas prices went down and articles in the press questioned whether hybrid vehicles were as good of an investment as originally thought. “My suspicions is oftentimes, regardless of what the product is, if the credit union promotes a loan, members won’t be all that motivated to buy the product unless they need it, and with hybrids, there are a lot of variables that come into play,” Hier said. Despite the low response rate, the credit union will continue to offer the loan and iPod giveaway. NW Preferred was the first credit union in the country to be approved for TIP charter.The credit union serves the insurance industry in the states of Oregon, Washington and Idaho. It’s not a hybrid loan program, but Vancouver, Washington based Columbia Credit Union’s use of a hybrid SUV as a sweepstakes prize is worth noting. Colleen Boccia, Vice President of Marketing and Business Development, said Columbia chose the 2006 Ford Escape hybrid SUV because of the environmentally conscious attitudes of residents in the Pacific Northwest. “We felt the hybrid worked well with our credit union identity,” Boccia said. The credit union is promoting itself as a hybrid between convenient online banking and a legacy of superior in-branch member service. The promotion is intended to increase the use of e-statements. Members who have an active checking account with e-statements receive additional entries if they have qualifying deposit accounts, loans or services. Members can also enter by participating in non-purchase activities, like an online scavenger hunt or attendance at educational seminars. Columbia, with assets of nearly $700 million, will select the winner in early December. Boccia said she has not considered introducing a specific hybrid loan into her product mix, despite the popularity of the vehicle among her membership. “We feel our auto loan program is very competitive the way it is,” Boccia said.The VP said Columbia is the top auto loan provider in Clark County, Washington, where its headquarters, 11 branches, and many of its 60,000 members are located. “If we didn’t have such a great market share, we might be a little more creative,” she said. The $293 million Crescent CU in Brockton, Mass. has begun offering a special financing program for hybrid automobile purchases that features a one-half percent discount on the loan rate. Crescent CU President/CEO Robert Gustafson said the approximately 39,000-member CU is the first in the area offering such a discount. “We feel it is our duty to assist those borrowers who want to help themselves and the environment,” he said. [email protected]