Credit union auto lending advisors may face a wave of conflicting tax deduction questions in the coming months. The sweeping taxation and funding bill making its way through the U.S. Congress contains a provision allowing a tax deduction on up to $10,000 in auto loan interest a year for the next few years, a break that could save many Americans hundreds of dollars. However, the tax break isn’t available for the purchase of used cars. The same bill eliminates a $7,500 tax credit for the purchase or lease of electric cars and trucks.
Some say these provisions politicize the retail automotive industry, leaving consumers in a strange position. Regardless of the vehicle to be financed, well trained credit union loan advisors can inform and educate their customers while boosting F&I revenue in their auto loan portfolio.
Credit Unions Can Educate Members On Auto Loan Tax Issues
Historically, credit unions have enjoyed a close, consultative relationship with their members. Industry organization National Credit Union Association echoes this sentiment stating credit unions are uniquely focused on Main Street, versus banks who often rely on investment lending.
According to the Experian State of the Automotive Finance Market Report Q1 2025, credit unions increased their share of auto financing reflecting an increased focus and growing opportunity to support members interested in purchasing a vehicle before tariffs hit. Average new loan amounts increased along with terms and payments in Q1 2025. Retail automotive consumers on average financed $41,720 of their vehicle, paying $1,109 per month – a 2.73 percent increase from Q1 2024.
As tariffs continue to plague the retail automotive industry and the inflation rate increases, credit union members who are purchasing a vehicle could use an advocate in their corner ready to inform and educate them on the intricacies of auto lending. Add potentially complex tax issues and it’s no surprise members might be confused. At EFG, we encourage lenders to lean into that member relationship by focusing value across all components of the deal.
Boost Auto Loan Portfolio Through Consultation
Your auto lending team members are experts at completing loans. But your members purchase a vehicle on average every 10 years! A lot changes in the world of retail auto lending, and you have the opportunity to guide your members toward the best deal for them – all while increasing loan volume and F&I product penetration.
The potential for a tax break from a new auto loan might look attractive. Make sure a new vehicle is the right option, and protect that choice with debt protection products. Tools such as WALKAWAY® are a great tool to safeguard the loan while easing a member’s potential financial concerns. You can increase vehicle loan volumes by mitigating the risks associated with defaults, collections, and repossessions.
A member purchasing a used vehicle might not know the potential tax break doesn’t apply to them. Fortunately, attaching valuable F&I repair and protection products to the loan will keep that vehicle on the road longer and guard against unexpected repair bills which can be financial devastating for a member.
Conversely, a member might not be aware the long-standing tax break for the purchase or lease of an EV could be eliminated if the Congressional spending bill is passed. According to the latest Experian research, EVs accounted for nearly 10 percent of new purchases and 60 percent of lease agreements. EFG’s MAP® Electric Vehicle Protection coverage fits the unique needs of your member while keeping that EV charged and on the road.
During these challenging economic times, we have the tools and support to help you capitalize on these auto lending opportunities while supporting your members and reducing risk. At EFG Companies, we’re more than an F&I provider, we’re your trusted business partner in auto lending. Together, let’s make more in 2025.
Connect with author Brien Joyce on LinkedIn, or contact him directly at bjoyce@efgusa.com or 770-843-4025.