Unitus Community Credit Union’s ($851.8M, Portland, OR) Green Loan program has proven a reliable complement to the credit union’s overall auto loans, says vice president of credit services, Paul Kirkbride.
Unitus Community CU has been offering a Green Loan program, which offers a 0.25% rate reduction on hybrid vehicles, for four years. Kirkbride says the credit union launched the program reasoning that consumers who took the time to research a vehicle’s energy efficiency would likely be more likely meet repayment obligations.
The Oregon credit union is among several credit unions that have been supplementing their auto loan promotions with a loan incentive for eco-friendly vehicle lovers. Columbia Credit Union ($815.7M, Vancouver, WA), Stanford Federal Credit Union ($1.4B, Palo Alto, CA) and United Financial Credit Union ($158.8M, Bridgeport, MI) are example of other credit unions that are rewarding hybrid car buyers with lower auto loan rates, between a 0.25% and 0.50% rate reduction.
Hybrid vehicle sales reached 36,000 in February, the highest level since March 2011, according to Baum & Associates, a Michigan-based research firm, which expects sales of fuel efficient cars to continue to increase as gas prices increase, as more cars become available and as manufacturers offer more models.
This year the more stringent fuel economy regulations passed by the U.S. Environmental Protection Agency and the Department of Transportation in 2010 take effect. That means auto makers will be producing even more electric, hybrid, or highly efficient vehicles and green auto loan incentives will likely apply to even more car buyers.
So far, Unitus Community CU has made about 400 green auto loans, which is still a smaller segment of its auto loan portfolio but one Kirkbride says has more dependable borrowers. While the credit union didn’t purposely aim to attract Gen Y with the loan, Kirkbride says it recognizes that Gen Y is a cost-conscious generation and will tend toward those vehicles for savings, making them “an educated buyer and a good borrower.”
“We have a segment of future borrowers – Gen Y – who will look very closely at cost of ownership and that will naturally lead them to more fuel-efficient vehicles,” Kirkbride says in an email to Callahan & Associates. “It’s clear the auto industry has already recognized what this massive segment really wants: lower cost of ownership (fuel efficiency) and increased connectivity.”
Gen Y is just starting to enter the car market and they’re favoring hybrid cars and wants them packed with technology, according to a financial advising firm Deloitte’s annual Gen Y automotive survey. Almost half of the 80 million Gen Y members are expected to purchase a car in the next two years. Over the next 10 years, Gen Y will be buying about 40% of autos sold, the New York-based firm predicts.