TruWest Teams With Costco to Draw Auto Loans

As credit unions paddle against a strong current of runoff in their automotive portfolios, some are finding ways they believe will attract more borrowers.

TruWest Credit Union of Scottsdale, Ariz. ($1.4 billion in assets, 93,502 members) announced Friday a new program designed to help members purchase new and pre-owned certified vehicles at discounted prices.

“Partnering with Costco to offer discounts on cars or trucks through preferred dealerships made perfect sense to us and we are excited to offer this service to our members,” Farid Farbod, TruWest’s SVP and chief lending officer, said. “Providing opportunities to our members to finance a home, car or small business is what we aim to excel at.”

Yet, like 2,817 of the nation’s 5,175 credit unions reporting March 2021 data to the NCUA, TruWest’s auto portfolio shrank over the previous 12 months. TruWest is also among 2,651 credit unions where total portfolios fell from March 2020 to March 2021.

TruWest punches above its weight in auto lending. It is the nation’s 289th largest credit union by assets, but is 119th in new car loans and 222nd in total car loans.

But its numbers have been slipping. It held $247.5 million in new car loans as of March 31, down 2% from March 2020. Used car loans fell 4% to $122.6 million.

Total loans fell 4.4% to $964.9 million. The $44 million drop in its total loan balance was more than explained by its $84.1 million increase in mortgage sales to the secondary market over the previous 12 months, including a $21.8 million increase in sales for the first quarter.

And that 78% increase in first-quarter mortgage sales went a long way toward explaining its 50% increase in non-fee operating income, which helped explain its first-quarter annualized return on average assets of 1.09%, up 42 basis points from 2020’s first quarter.

For all credit unions, first-quarter ROA was 1.04%, up 51 basis points.

And, with similar chains of effects, credit unions’ overall ROA for the three months ending March 31 was at record levels even as new car loans fell 3% to $141.4 billion and used car loans rose 5.3% to $243.2 billion.

The auto loan runoff is being accelerated by members using their increased savings to pay off credit cards, then car loans. But credit unions’ share of auto loans has been falling slightly. This indicated credit unions are losing loans to better competitors, their own tighter lending standards or some combination.

Cox Automotive reported Thursday that lenders, including credit unions, tightened their credit standards from April to May after loosening them for each of the previous three months. Its Dealertrack Auto Credit Availability Index was 97.7% in May, down 0.7% from April and tighter by 1.5% from February 2020, the month before COVID-19 was declared a pandemic.

TruWest is trying to bring in more borrowers through its program with Costco. The program allows potential buyers to shop online for cars through a link at truwest.org. They can also apply for an auto loan and get preapproved, which TruWest said can save time for borrowers before they go to a dealership. Then buyers can visit a Costco-approved dealership to see the car they are interested in.

The service has free online calculators that show the loan amount based on the price of the car and down payment.

Additionally, when credit union members finance the purchase of a car through TruWest and complete a survey within 30 days, they will receive a $50 Costco Shop Card. If credit union members are not members of Costco but purchase a car through the program and finance the purchase through TruWest along with completing a survey, they will receive a one-year complimentary paid Costco Gold membership.