Customers of credit unions get cheapest car loans
CREDIT unions have emerged as cheaper than banks for motor loans.
The average credit union loan rate is 7pc compared with an average of 11pc for five of the leading banks, a survey carried out by the Irish Independent shows.
Credit unions are reporting a surge in business coming to them from people who have been turned down for credit by the mainstream banks.
Almost a third of all car buyers secure a loan from their credit union, making it one of the most significant sources of motor lending.
A survey of 50 credit unions, carried out by the Irish League of Credit Unions at the request of this newspaper, shows that the average annual percentage rate (APR) for a motor loan is 7.1pc.
A sample of the rates charged shows that the Westport Credit Union charges 6.7pc for car loans, while at Larkhill and District in Dublin the rate charged is 6.75pc. St Anthony's and Claddagh Credit Union in Galway has a 7.5pc rate.
A survey of bank lending rates carried out by this newspaper shows that for a €10,000 personal loan over five years the interest rate (APR) varies from 10.5pc charged by Ulster Bank to 11.47pc for National Irish Bank variable personal loan.
Permanent TSB quoted 10.6pc, with Bank of Ireland quoting 11pc, and AIB quoting 11.35pc. However, some banks charge lower rates for motor finance.
Credit unions have seen a marked increase in the numbers of applications for car loans since the third week in January, a spokeswoman for the Irish League of Credit Unions said.
Members of credit unions are reported to be buying second-hand cars in particular, and they are reported to be negotiating hard on price and shopping around for the best finance deal.
Some car firms have stepped in to provide finance for the purchase of new cars in a bid to counteract the reluctance of banks to lend.
Volkswagen has a 6.75pc rate to support the buying of its Audi, Skoda, Seat and Volkswagen brands. Ford Ireland and Mitsubishi are also offering competitive deals for those prepared to buy new.
General manager of one of the credit unions surveyed, Sean Murray of Naas, said: "We have noted a marked increase in car loans for the first two months of 2010 compared to the same period last year.
"It is also apparent that members are much more discerning when it comes to the rates on offer."
The average rate charged for a standard credit union loan is 9.8pc, but the average home improvement rate is 7.1pc, with the average education loan rate 6.3pc.