Credit Unions Tighten Belts During Rising Rate Enviornment

Plenty of dealerships work with credit unions as a local alternative to national lenders because of the lower competitive rates and unique benefits they offer. However, even credit unions aren’t entirely exempt from a rising rate environment as AZ Auto RV, an independent dealership in Mesa, Arizona, has noticed that its credit unions partners have increased their rates.

“Most of my credit unions are based out of the state,” Finance Director John Duncan told Powersports Finance. “It was kind of crazy, every day I was getting notices. I think that there are 47 credit unions that are all a part of this one collective and every single one of them raised their rates this year, which hasn’t happened in years.”

AZ Auto RV works with a credit union collective called CUDL. The dealer gets the majority of its financing through credit unions, making it the dealers “number one” lender. However, these credit unions began to raise their rates in July, Duncan added.

The interest rates didn’t uniformly rise for each credit union. On average, interest rates were increased by 50 basis points to 1%.

Lucky U Cycles, an independent dealership based in Wildwood, Florida, partners with Campus Credit Union but has not noticed any rate hikes. However, the dealership has seen that the credit union was getting stricter in its underwriting, Jeremy Coon, owner of Lucky U Cycles, told PSF.

“I haven’t seen them raise the rates,” Coon said. “I think they just became a little bit tougher. That’s the hardest thing I see. I was doing probably 18-20 deals with them a month, and now we’ve probably cut back to five.”

Specifically, the credit union is “pickier” on loan values and terms, Coon added.

Laredo, TX.-based BMG Xtreme Sports has likewise not seen any rate hikes from its credit union partners, but it noted that interest rates are determined “based on the consumer’s credit history,” Manager Celine Rodriguez said.

It’s no secret that we are in a rising rate environment. The Federal Reserve raised rates by 25-basis-points back in June, with plans to do so again before the year is over. Interest rates were already at record lows, and hikes are typically a sign that the economy is stabilizing, but lenders and dealers still need to adjust after not having rates rise for several years.

Don’t let opportunity ride by. Join us for PowerSports Finance 2018 on Nov. 6-7 at the Omni Fort Worth. Early registration ends this Friday, September 28th at midnight, so be sure to register here. Go to for more details.

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