Auto Loans on Upswing in County

June 8, 2015

Jondi Gumz, Santa Cruz Sentinel

In a sign the economy is picking up steam in Santa Cruz County, loans at not-for-profit credit unions are up compared to a year ago and auto loans are up dramatically.

According to the California Credit Union League, credit union loans in the first quarter in Santa Cruz County totaled $377 million, up 15 percent.

Loans to buy a used car jumped 41 percent with new car loans close behind at 39 percent.

Credit union membership grew to 72,395, up 6 percent, and deposits are up 10 percent.

“It’s driven by people wanting to bank locally and have their loans be local,” said Tonee Picard, executive vice president and chief development officer at Bay Federal Credit Union, the largest of three credit unions based in Santa Cruz County with $752 million in assets.

As cooperatives owned by their members, credit unions have a mission to provide members with affordable financial services. They offer lower interest rates on loans; fees tend to be lower than those at banks.

Picard said Bay Federal has been making $4 million to $5 million a month in auto loans, largely for used cars. The best car loan rate is 2.24 percent for those with a credit score of 730 or greater.

Year-to-date loan originations total $66 million, up 87 percent from a year ago.

Jumbo mortgages are now available and an online banking system with mobile access is coming in September.

“We’re so close to Silicon Valley, it’s a necessary thing,” Picard said.

First-quarter membership was 58,916, up 6 percent from a year ago following the merger with the Santa Cruz County Employees Credit Union, with 189 employees.

“If all the positions were filled, we would be over 200,” said Picard, citing openings for IT, loan underwriters and frontline staff.

“Auto loans have been the biggest surprise,” said Beth Carr, president and CEO at Santa Cruz Community Credit Union, which has $103 million in assets.

“We’re funding approximately $2 million a month in auto lending,” she added, with 95 percent of the auto loans for used cars. “We have always financed more used than new, again, a result of our community and our credit union’s low-income, community-development certified mission.”

First-quarter membership was 12,141, up 7 percent from a year ago.

Business loans during that quarter helped create 12 jobs and retain nine jobs, according to data Carr said will be submitted to regulators.

“We do a lot of micro business loans,” Carr said, noting loans to buy a bicycle were added a year ago.

The definition for micro business loans can vary. They can be $25,000 or less or range up to $50,000, often to buy new equipment to help a business owner expand.

Carr noticed unemployment is down in Watsonville, where the credit union has a branch at 1428 Freedom Blvd., and is looking at ways to reach out to potential members there, where people have a choice of three check-cashing outlets in a short stretch of Main Street.

“You look at the fees and what you’re paying for your money easily could be 200 percent,” Carr said, noting credit unions are owned by members who have a say in how things are run. “We have a strong ethical responsibility to our members that’s very difficult to have education on.”

Watsonville Hospital Federal Credit Union is the smallest credit union based in the county with 1,338 members, $12 million in assets and five employees.

Vehicle loans for used cars are a large part of its loan portfolio, 34 percent compared to 24 percent at Santa Cruz Community Credit Union and 26 percent at Bay Federal Credit Union. The best rate available is 2.69 percent, depending on credit history.

The credit union is open to not only hospital employees but also people working at Community Bridges, Fox Racing Shox, Westek Electronics, Salud Para La Gente and Physicians Medical Group of Santa Cruz County.

Link to the Santa Cruz Sentinel Article