Car dealers tend to offer their best deals right around the holidays, and in recent weeks PNC Bank has been pushing the gas pedal on a loan program that allows buyers to get pre-approved for a specified loan limit and then go shopping for the car they want as if they were cash buyers.
The loan, called the Check Ready program, is geared for people who plan on buying a car in the near future and want the certainty of having their financing arranged in advance. Consumers can apply for the loan either online or at a PNC branch without specifying what car they want to buy.
Within 15 minutes of applying for the loan, the car buyer will get an answer, and if approved, PNC will send them a blank check overnight or they can pick it up at a bank branch.
Competition for car buyers? business is vigorous. Other banks and lending institutions also have been pushing auto loans.
Ivan Drury, a senior analyst at Edmunds.com, said lots of financing deals are available right now ? such as Chrysler offering zero percent financing for seven years ? and that has been enticing people to come back into the market even if they have old car loans that are currently under water.
Drury said so far in 2016, about a third ? 32 percent ? of all trade-ins toward buying new cars were worth less than the outstanding value of the old loans. That?s the highest percentage of underwater car loans on record since the Santa Monica, Calif., auto industry information service began keeping track in 2002.
Drury said the average underwater car buyer is upside down on his existing vehicle to the tune of $4,832 ? another record.
?It?s a two-fold effect,? he said. ?People are financing cars over longer cycles. Over the last decade, people have been financing cars for longer periods of time ? from about five years to seven years now. People still want a new car within the same five-year time frame and they end up with negative equity. But they figure they will roll the negative equity into a new car loan and pay it off.?
Dealers aren?t the only ones offering incentives near the end of the year, said Greg McBride, chief financial analyst for Bankrate.com based in New York. McBride said he is aware of many credit unions also running specials on auto financing around the holiday season.
?It?s best to shop around,? he said. ?It?s also a good idea to have your own financing in place. That way you are not beholden to the dealer. You don?t have to accept whatever financing the dealer offers.?
Pittsburgh-based PNC has been ramping up the visibility of its program through its PNC.com website. Officials say the bank also has a social media marketing plan for Check Ready.
Check Ready is a program that was actually developed at the former Cleveland-based National City Bank. PNC inherited the program in 2008 when it purchased National City for $5 billion following National City?s loan losses during the subprime mortgage crisis.
?The product has existed for some time. But we enhanced our underwriting process to speed up the approval process,? said Chris Dervan, a senior vice president at PNC Bank in charge of consumer lending. He added that the loans are for personal automobiles only. They cannot be used for commercial vehicles, trailers, boats, motorcycles or RVs.
The minimum loan amount is $7,500. The maximum loan amount is $50,000 and the loans may only be used for vehicles up to eight years old.
Although PNC officials said the bank wants to increase its automobile loan portfolio, they declined to say what share of its loan business comes from the automobile loan division. According to PNC Bank?s third quarter 2016 earnings report, total loans grew $1.4 billion to $210 billion. Total consumer lending increased $300 million due to growth in auto, residential mortgage and credit card loans.
The bank chose to highlight the Check Ready program at a time of year when auto dealers tend to offer the best deals.
One of the top reasons auto dealers are willing to sweeten the pot for car buyers during the holidays is because they need to get rid of the current year?s car models.
Dealerships and car makers are clearing out their inventory to make room on showroom floors for the incoming models. Dealers also are trying to improve their sales numbers at the end of the year, according to CarsDirect.com.
Dervan said interest rates on the Check Ready program are subject to change, which is why he declined to give specific numbers.
?Interest rates are different for different customers,? he said.
?We strive to make the rates competitive with what a customer could obtain from an auto dealer.?