Auto dealers' 0% financing has taken a new turn f with General Motors' "Zero to 60." Rather than limiting 0% financing to 24-36 months, GM is offering 0% for 60 months.

Auto analysts say credit unions can no longer compete. But credit union experts have other ideas.

Automotive News Editor Edward Lapham says 0% financing has "left banks and credit unions nearly powerless to compete" for new auto loans.

But Mike Schenk, CUNA's VP of Economics & Statistics, encourages more CUs to help members finance cars through home equity loans that provide tax advantages. "The auto dealers' 'special deals' aren't that special, especially when you consider the after-tax cost of a loan."

Given a choice between a rebate and 0% financing, CUNA Consumer Facts Director Susan Tiffany says members should be advised to choose the rebate. CUNA's consumer Web site (www.creditunion.coop) offers a free calculator to compare costs.

Tony Boutelle, President & CEO of Credit Union Direct Lending (CUDL), offers 4 more ideas for CUs:

1) Work closely with dealers offering 0% financing, because consumers who don't qualify for 0% need conventional loans.

2) Offer dealers "buy-rate" financing instead of a flat fee.

3) Offer consumers indirect lending at the point of sale.

4) Replace the faxing process with "lender aggregation" an Internet system that cuts processing costs by 33%. It also expands lenders' reach among dealerships. This service is available to credit unions in several states through CUDL in Rancho Cucamonga, California.

Copyright Credit Union National Association, Inc. May 12, 2003
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