Car buyers looking for loans

Yakima Valley residents who want to purchase a new or used car will be able finance their purchase if they have a decent credit record.

Make that a great credit record and a decent down payment.

Local dealerships, including ones with a high percentage of customers who finance their purchases, remain optimistic customers will still get financing.

But nobody denies that it's more challenging than it used to be.

"(For) the folks who may have, B, B-minus credit a year ago, it was a slam dunk that we could get it done," said Rob Hendrix, general manager of Carey Motors in Yakima. "Now it takes quite a bit more work. We'll get them financed, but it's not as easy; it's not quite as automatic."

When President Bush called for the support of a $700 billion bailout plan for troubling Wall Street firms, he speculated that it would hit close to home when consumers would be unable to get financing.

But local financial institutions say that they can still provide loans.

"As long as a financial institution is strong -- (it has) a diversified loan portfolio, (it) doesn't include a lot of subprime loans and as long as (it has) conservative investments -- it should be able to lend money," said Mina Worthington, CEO and president of the Yakima Valley Credit Union.

And for those who do qualify, the interest rates are slightly lower than they were this time a year ago, Worthington said. According to the credit union's Web site, interest for 48-month new car loans is as low as 4.74 percent. The lowest rate also includes a discount for a payroll deduction. But, rates may vary based on credit history and the length of the loan.

There are a number of factors that banks and credit unions consider when deciding the number of car loans they can provide, said Michael Broadhead, president of Central Valley Bank.

One of those factors is a customer's credit history. Another one is liquidity -- the amount of cash an institution has on hand.

The current poster child of an organization that failed to do so is the recently defunct Washington Mutual. Federal regulators closed the doors of the Seattle-based savings and loan last month after customers pulled out $16.7 billion in deposits in a little over a week.

Those deposits, along with a bank's other investments, provide the funding for lending products such as car loans.

"Everybody needs to look at their own bank," he said. "Do they have the ability to go forward? I believe that most of them do. I believe that the community banks are pretty strong.

But weeks of grim financial news, however, clearly affected consumers, Hendrix said.

Typically, the dealership has a 60-40 ratio of finance to cash buyers. But in the last month, about 60 percent of its buyers have paid with cash.

He's also noticed a 10 percent increase in the company's service department, an indication that more folks are opting to maintain their existing vehicles rather than purchase a new car.

Jim Peterson, general manager of Lee Peterson Motors, noticed a similar trend.

"We feel there are some people out there waiting to see how things play out" with the economy, he said.

But automobile manufacturers, which reported across-the-board sales declines last month, are still pumping out incentives to lure customers.

For example, a slew of last-minute customers came to Lee Peterson Motors for discounted vehicles from a General Motors' promotion that priced cars at employee discount levels, Peterson said.

But bailout or not, both dealerships and financial institutions believe the expectation of good credit history and a decent down payment will stick around long-term.

Hendrix knows he'll lose more sales in the short- term but believes he'll benefit in the long run. In general, those with solid credit tend to be more conservative shoppers.

"They'll be more happy with the decision they'll make, and that's what we want," he said.

* Mai Hoang can be reached at 577-7685 or mhoang@yakimaherald.com.