DETROIT (1/18/13)--Credit unions nationwide are offering low auto-loan rates, the Detroit Free Press reported Thursday.
Interest rates on new- and used-car loans are hovering around 3% at credit unions and banks. Greg McBride, senior financial analyst at bankrate.com, told the Free Press his company has never seen such low rates.
DFCU Financial CU, based in Dearborn, Mich., with about $3.3 billion assets, is offering 3.49% for 49 months when the car payment is automatically deducted from a DFCU checking or savings account, the paper said. Also, the credit union makes a special dividend payout each year that would lower the effective interest rate.
The paper also mentioned that Communicating Arts CU in Detroit received an initial federal grant of $1.5 million in November 2011 to help bail out consumers with very high car-loan interest rates.
Those funds came from the U.S. Treasury Department's Community Development Financial Institutions Fund (News Now Aug. 10). "The 2011 funds allowed us to refinance predatory car loans for about 100 people, saving them an average of $80 per month," CEO Hank Hubbard said in August. "That's a total savings for the group of over $400,000 through the life of the loans." As members pay the loans back, the credit union can lend the money out again, he said.
With the program, the $34.3 million asset Communicating Arts conducted 34 auto bailouts in which the original car loan rates exceeded 19%--with one member refinancing an auto-loan rate down to 3.25% from 25%, said the Free Press.
Often car shoppers don't realize they have financing alternatives, Hubbard told the paper. Some old loans may have been made years ago during the credit crunch following the financial crisis, he added.