Credit union, GM offer discounts to boost sales

December 11, 2008 at 12:00a.m.

STAFF/WIRE REPORT

NEW YORK — A consortium of credit unions in four Midwestern states is pledging $10 billion in loans to car buyers and teaming with General Motors Corp. to offer special discounts to boost flagging car sales.

The group, made up of 1,200 credit unions in Michigan, Ohio, Indiana and Illinois, said Wednesday it will offer its members a “supplier discount” plus $250 off the purchase price of GM vehicles.

“Access to credit is a huge deal in America right now,” said Mark LaNeve, GM vice president for North American sales, in a conference call with reporters. “Our industry has been hard-hit, which runs on credit all the way through to the consumer.”

A supplier discount is roughly 5 percent off the manufacturer’s suggested retail price of a vehicle, LaNeve said, and can be applied in addition to any other discounts and incentives already offered.

The program runs through June 30 and, depending on the results, may be launched nationwide in early 2009, the credit union group said.

Warren-based Seven Seventeen Credit Union is among those participating and is adding extra benefits. An approved borrower will have 0.25 percent cut from their interest rate and receive $5 in cash for every $1,000 borrowed.

“It adds value to the program and encourages people to participate,” said Karen DeSalvo, vice president of marketing for the credit union.

She said Seven Seventeen has not changed its underwriting criteria since the credit crisis began this fall and has money to lend to car buyers.

GM has been working furiously to lift its vehicle sales, which are down 22 percent for the first 11 months of the year. The Detroit automaker launched its annual “Red Tag” sale earlier than normal this year, and it’s also allowing salaried workers and retired salaried workers to extend employee discounts to nonemployees.

The new discounts come as GM awaits the fate of $14 billion in emergency federal loans for the auto industry.

David Adams, president and chief executive of the Michigan Credit Union League, said credit unions have proved less vulnerable to the credit crisis, and financing rates from credit unions run about 1 percentage point less than rates from conventional banks. Borrowers who want to buy a car now from the group’s credit unions can expect rates between 4.5 percent and 5.5 percent, he said.

“It’s tough for banks and other lenders to extend credit to consumers with lower credit scores,” Adams said, adding that credit unions are “better positioned to offer access to credit to many people who otherwise would not be able to qualify for a loan.”

While the supplier discount is exclusive to GM, Adams said the $10 billion the unions are pledging can be used to finance a car purchase from any automaker.