Credit Union Kills Auto Loan Campaign After Dealers Cry Foul

I was asked to comment on this by a credit union publication. My feelings were that the credit union was doing what it should, educating the members as to how dealer financing works. An educated member will make a much better decision when considering purchasing a vehicle in the future.

What do you think?

Grant Sheehan

August 4, 2014

They say never bite the hand that feeds you. But that seems to be what Space Coast Credit Union did with an auto lending campaign attacking interest rate markups charged by dealerships. The credit union had to do a big U-turn after the auto industry protested, with some car dealers decrying the marketing initiative as a smear campaign. 

Few consumers are aware of “rate markups.” A rate markup (sometimes referred to as “buy-ups” or “dealer reserves”) occurs when a car buyer arranges for bank or credit union financing at the dealership, and the rate they get is marked up. It is a fairly common practice, encouraged by the indirect lending policies of both banks and credit unions, but some people feel these markups are “kickbacks” to car dealers. The fact remains that most consumers have never heard of rate markups, and don’t know what they are. 

Space Coast Credit Union doesn’t engage in rate markups, instead choosing to compensate its dealer partners using a flat fee. So they decided to create a consumer awareness and advocacy campaign calling attention to the issue. According to the credit union, rate markups average around 2.5% and gouge consumers for hundreds of millions of dollars. Space Coast wanted to get the word out, figuring they could grow their auto loan portfolio. 

The credit union’s strategy made sense, and it sounds reasonable enough: build a marketing campaign that exploits and leverages a relevant competitive advantage. But--   Continue Reading>>Credit Union Kills Auto Loan Campaign After Dealers Cry Foul