Friday, May 24, 2024

SECU's "Fast Eddie Used Car Lot" Lending Statistics...   ... Fast Eddie Facts?

   You can't make this stuff up! Or can you?

It's clear from the recent "mea culpa" pullback from 5-tiers to 3-tiers on race based lending (RBL), that the SECU Board knows it made a bad decision. How did that happen?

One culprit appears to be that the SECU Board was "sold" some Fast Eddie Car Lot statistics ("Fast Eddie Facts" or "FEFs") by the CEO and loan administration staff. 

The "We're not serving A-paper borrower" fiction is disproved by staff's own data [see prior post here]. 247,000 SECU borrowers were A-credit score folks before RBL and owed more than the "C/D/E" folks combined! 

The SECU Board was further misled by the presentation of credit bureau data, which showed the amount of borrowings SECU members had with other creditors [didn't know that the credit bureaus sold your private borrowing data, did ya'!]. The "FEFs" claim from loan administration was that race-based lending would bring all of that member borrowing back to SECU.

Let's take a quick look at one easy example - new auto financing - of why members often choose other lenders - and why they won't be "coming back". 

The chart below (which comes from a credit bureau!) shows where people finance their new car purchases. You'll note that 61+% of folks finance their new car purchases at the dealership, only 10% finance with a credit union. The credit bureau notes that the dealership dominance in this sector (61+%) has been steadily increasing.


Most folks don't realize that when you finance a new car at a dealership, the car finance department has a long list of rates from different banks which the dealership is authorized to offer you. If you chose one, the dealership completes the loan papers on the spot, on behalf of the bank, and the approved loan is sent to the bank - and you'll make your payments to that bank. 61%+ (and growing!) of all new car buyers chose this dealer financing method.

✅ With the introduction of race-based lending, the SECU Board was seduced into believing that SECU could "win back" much of this A-paper new car borrowing. That will not be true. Here's why! 

😎 Picture your little "A-paper self " sitting in the dealership, having selected a bright and shiny new car. You've haggled over the trade-in, agreed with your spouse - excited kids bouncing in lap - to color and heated seats. You're eager to get behind that wheel! It's been a long day, kids are restless, getting hungry. Spouse has "that reaching boiling point look". Excitement plus, everyone's ready, anxious to hit the road! The dealer leans across the desk and asks if you need financing? You say no, I'm going to use SECU [SECU's current "best", A-paper, 60 month new car rate is 6.00%].

✅ The car salesman sighs and says that's fine, but it will take some time to set up. Or, he can offer you the following rate right now from BOA and you can be on your way home in 10 minutes:

   👉   Bank of America Logo  Fixed rates [as of 5/23/24] 60 months - New car (dealer) rate 5.94% APR**

   👉 ** Ask about additional Preferred Rewards interest rate discount up to 0.50%.!
😎 What would you do?

... why bother to wait and "pay more" at "your" credit union, if SECU is no longer a "unicorn"?