In the bygone days of big-finned land yachts armored with acres of chrome, more San Diegans worked for big employers or the military or defense contractors, and most belonged to credit unions. Located right on the job site, sometimes even behind the security gates, credit unions made one kind of loan and did it very well — auto loans.

Working people could buy a lot of car in those days because their credit unions offered two unbeatable advantages. First, low loan rates, mainly because their memberships were restricted and almost completely employed. And second, near-painless repayment through payroll deduction.

Today more people work in small business as the economy restructures and big employers downsize and outsource. Car buyers can get auto loans from almost anywhere, including dealers themselves, and credit unions offer every kind of loan to wide open fields of membership.

Thus the auto lending market is more competitive than ever, says Lisa Hill, vice president of lending at San Diego County Credit Union. In absolute dollar terms, her credit union had the county’s second-largest auto loan portfolio at $325 million on June 30, 2003. The county’s biggest car lender was North Island Financial Credit Union, with $393 million on its books in new and used auto loans.

But despite the cutthroat competition, industry sources say that local credit unions snag a larger share of auto loans — 24 percent — than the statewide average of 19 percent.

Making financing easy for buyers and profitable for car dealers at the point of sale is one reason, says Tony Boutelle. He runs Credit Union Direct Lending, an Internet-based electronic financial services company that links some 2,000 dealers nationwide with 260 credit unions. Members select their cars and, if the dealer participates in the CUDL program and the member qualifies, a car loan is just a click away.

CUDL’s market penetration among both dealers and credit union lenders in Southern California is lower than in Northern California. But San Diego credit unions have made major inroads with local dealers and borrowers anyway by creating their own systems.

“We strongly encourage our members to get a letter of preapproval,” says Stuart Camblin, CEO of San Diego Metropolitan Credit Union. “This gives them the best rates and the fastest loan turnaround, which is what both the buyers and the dealers want.”

Hill’s credit union and several others go one step further to flag members’ accounts online with a “you’re preapproved!” message and a specific dollar amount. The buyer gets an option contract from the dealer, brings it (or the vehicle, if it’s used) to a credit union branch and gets a check.

Gene Shabinaw, who runs the lending program at California Coast Credit Union, says credit unions have other advantages in the auto lending game.

“We try to meet our members’ needs by loaning as much as possible on a vehicle,” he says. Based on an applicant’s individual credit history, he adds, that could be as much as 125 percent of the vehicle’s price for the very best borrowers.

“Many people want to finance their tax and license also,” says Shabinaw. “We try to make it possible for them to get as much vehicle as they can with the funds they have.”

Pursuing this kind of lending strategy brings two additional factors into play. The first is what the industry calls “risk-based pricing,” in which the interest rate a borrower pays is based on her or his individual credit history, including their Fair Isaac & Co. score.

“Our regulator says a person’s FICO should not be the determining factor in granting credit, and in our case it isn’t,” says Camblin. “But we believe that people with better credit histories should receive better interest rates, so we try to take a person’s total credit experience into account.”

Shabinaw agrees. “Our risk is in the member, not the vehicle,” he says.

The second factor when lending most or all of a car’s value is the borrower’s risk of going “upside down” on a loan. A loan goes upside down when the car’s value is less than the outstanding loan balance. Technically, lenders say, that happens the minute a car is driven off the dealer’s lot, unless a good-sized down payment has been made.

Thus credit unions and other lenders offer gap insurance, which covers the difference between a car’s value and the amount owed on it, in case an accident leaves the car totaled and insurance doesn’t cover the loan balance.

Credit union auto lending has taken a bit of a hit from manufacturers’ zero percent loan programs, but only because borrowers take the offers at face value instead of doing the math. The better approach for a would-be new car buyer is to take whatever rebate is available, then do the financing at their credit union, Shabinaw, Hill and Camblin agree.

County Credit Union offers the example of a $20,000 car with a $3,000 rebate, financed at a credit union at 4.75 percent for five years. That $17,000 loan would require a $318 monthly payment, in comparison to the $333 monthly needed for the same loan at zero percent for the full price.

Car loans remain a mainstay of credit union lending, although the present terrain would be unrecognizable to a credit union manager of a generation ago. Among local institutions, new and used vehicle loans make up anywhere from 23 percent to 93 percent of the total loan portfolio, with Sony San Diego at the top and San Diego Medical at the bottom. The average is 47 percent.

The trend is for car loans to make up more of the smaller credit unions’ assets, compared to such local giants as San Diego County and Mission Federal. Both come in near the bottom of the list, owing to their large real estate portfolios, says Hill at SDCCU.

“Although we push car lending pretty hard because it’s profitable, we are a big real estate lender and we’re experiencing the re-fi boom,” she says. Likewise, Mission Federal’s real estate portfolio equaled 56.6 percent of its total lending, compared to 29 percent for car loans.

Car Loans Remain A Credit Union Staple

Used car loans

Total car loans

Total loans

Car loans as % of total loans

$ 934,610

$2,372,787

$ 2,558,684

93

610,999

1,507,419

1,985,860

76

544,752

1,054,919

1,462,629

72

398,614

1,000,546

1,421,117

70

1,365,110

2,477,499

3,596,612

69

2,171,987

3,618,029

5,846,174

62

102,875

314,870

514,584

61

18,761,351

29,201,466

49,266,574

59

131,060,371

222,746,960

377,966,955

59

4,322,363

7,366,051

12,551,594

59

13,008,023

18,763,351

32,645,531

57

175,497,743

289,278,611

518,242,451

56

25,129,188

48,220,496

90,204,119

53

59,048,192

86,628,171

188,450,119

46

23,963,586

39,448,159

86,116,006

46

33,872

93,715

206,918

45

65,625,323

110,099,660

254,307,221

43

252,215,740

392,913,013

977,535,966

40

105,399,010

162,545,057

433,925,089

37

5,187,911

10,121,291

27,389,435

37

6,739,081

11,180,778

31,430,430

36

7,982,801

12,508,716

35,338,127

35

859,340

1,663,360

4,956,792

34

83,772,339

146,885,022

452,063,961

32

99,856,919

168,464,896

564,465,577

30

162,962,278

815,268,213

29

76,395

91,719

341,301

27