Canada’s Interest Rate Hike Makes Credit Unions More Appealing to Dealers
Whether you’re a dealer in Canada or the United States, this is for you!
The Bank of Canada has just hiked its interest rate .25% for the third time in a year to 1.25%. Strong economic growth is the driver for the rate hike, attempting to slow the economy’s pace. But this isn’t something that happens exclusively in Canada, nor is it just recently that it’s been a factor. Even in the United States, the American fed rate fluctuates based on economic factors.
As a dealership, the interest rate changes filter down to you. It can mean slight but impactful increases in finance rates for new cars and bank rates for pre-owned vehicles. Just a quarter-point interest change increases the monthly payment on a car by more than two dollars over a 60-month term.
However, less affected by Bank of Canada interest rate hikes are credit unions. Credit unions are free to set their own interest rates for their members. That means the average prime consumer can usually obtain a better interest rate on their car loan through a credit union than a bank.
It might not be news to you, but it’s worth reiterating. Whether it’s for a budget-conscious customer or not, auto financing through credit unions can save money and lower payments. To offer that option is good service for your customers, plain and simple.
American dealers already know it – the market share for credit unions in personal and dealer-financing auto loans is 28% and climbing. Yet, Canadian dealers have been slow to catch on, but their customers haven’t. Car shoppers are choosing a vehicle, then obtaining their own financing at the credit union, and the dealer loses out on their reserve and other F&I office offerings.
If you’re a Canadian dealer, offer your car buyers the option of credit union financing. You’ve heard how successful CU Direct has been in the United States already. But did you know CU Direct has been operating in Canada since 2016? It isn’t a replacement for your current lending solutions, but it’s certainly another tool to add to your bag, and one your customers will love you for.
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