“Green” is the hottest color for automobiles today. Environmental concerns are behind everything from President Barack Obama’s push to develop more green vehicles to the Cash for Clunkers program that aimed to get gas guzzlers off the road.

Now banks and credit unions are jumping on the eco-friendly bandwagon by ramping up green auto loan programs. This type of financing offers lower interest rates for customers who buy hybrids or fuel-efficient vehicles.

While some financial institutions have offered green auto loans since the mid-2000s, others have recently introduced the products.

At U.S. Bank, there’s been an increasing push in the past year to address environmental concerns, says David Herpers, vice president of consumer credit products. In April, the Minneapolis-based bank introduced green auto loans.

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“As a bank, we want to do what we can to be responsible as it relates to green initiatives,” Herpers says. “But it should be a win-win-win. The bank and the environment and the customers win.”

Customers who buy a vehicle certified as green by the Environmental Protection Agency receive a 0.5 percent discount on the interest rate of their loan for a new or used vehicle.

The bank benefits as well because a review of its vehicle loan portfolio has shown that shoppers who purchase fuel-efficient autos are more likely to make their payments than consumers with other types of vehicles, Herpers says.

“It decreases our risk in our loan portfolio,” he says.

While it’s too soon to really tell how this product will be received by U.S. Bank customers, financial institutions with longer histories of “green” lending generally report strong success.

At Addison Avenue Federal Credit Union in Palo Alto, Calif., the credit union first introduced a hybrid vehicle loan on Earth Day 2005 at the request of one of its member organizations, says Doug Marshall, senior vice president of retail.

Now, the credit union considers a number of gas- or diesel-powered vehicles “green” if they have a highway fuel economy rating of 40 miles per gallon or greater. Buyers of such autos are eligible for a 0.5 percent interest rate discount. Customers who sign up for e-statements get another 0.25 percent off.

Today, these loans account for 20 percent to 25 percent of Addison Avenue’s business, Marshall says. Because a large number of the credit union’s members work in high-tech fields, they are “comfortable with technology and look at these things a little earlier.”

Success stories

Green loans are likely to appeal to millennials — those drivers who are now in their teens to late 20s and tend to be more environmentally conscious than previous generations, says Jeffrey Stoltman, associate professor of marketing at Wayne State University in Detroit.

However, the loans may be finding a wider audience as well. While auto sales plummeted in 2008 — and were off to a slow start this year before the Cash for Clunkers program had kicked in — sales of some fuel-efficient vehicles held up well, according to Stoltman.

Stoltman says increased interest in green cars wasn’t just a matter of consumers thinking “I want to help the earth.” Instead, he says, it was “I want to save pennies.”

Traci Gearhart, senior information technology manager for Levi Strauss & Co. in San Francisco, used a green auto loan from Addison Avenue to buy her 2009 Toyota Prius. She made the purchase after her family moved from the city to the suburbs and she could no longer use public transportation for her commute.

“We wanted to do something that not only saved us money but was also good for the environment,” she says.

Gearhart, a long-time Addison Avenue customer, says she shopped around and found the green auto loan to be “a really nice incentive.” It also had the lowest interest rate she could find.

“Certainly, that was our deciding factor,” Gearhart says.

Robert Looby, of Pittstown, N.J., a member at Affinity Federal Credit Union, says he bought a 2008 Ford Focus for himself last summer after buying Focuses for his two daughters.

A committed Ford buyer, Looby had driven a Ford Ranger, but decided he wanted a vehicle that got better gas mileage. So he selected a Focus.

He shopped around for auto loans and found the best deal at Affinity, based in Basking Ridge, N.J., which offers a 0.25 percent discount for autos in the EPA’s Green Vehicle Guide. Customers also receive a $50 gas card and a tree planted in their name through the Arbor Day Foundation, says Johanna Gomera, consumer loan manager. Those who have already had an Affinity auto loan get another 0.25 percent discount through the credit union’s loyalty program.

“Economic incentives can make all the difference between people taking action or not taking action.”

When shopping for a vehicle loan, the green discount was a nice surprise, Looby says.

“Fuel economy is important, but second to quality to me,” he says. “It’s all about the bottom line.”

Finding green loans

Consumers looking for green loans will have to do a bit of homework.

The loans typically are offered through credit unions and some banks. Consumers can check with their favorite financial institution to see if the lender offers such loans.

Consumers also should be aware that the criteria for what constitutes a “green” auto vary widely.

Some financial institutions — like Regions Bank, headquartered in Birmingham, Ala. — limit their green auto loans to hybrids. Others — like Seattle Metropolitan Credit Union — rely on the EPA’s SmartWay guidelines to determine what constitutes a green vehicle.

Autos with good fuel economy and low emissions can receive the SmartWay designation, and the list of qualifying autos can be found in the EPA’s Green Vehicle Guide. These include everything from a gasoline-powered Toyota Camry to a diesel Volkswagen Jetta or a flex-fuel Chevrolet Tahoe.

While some shoppers may think of their wallets before the environment, the end result is the same. Pat Durkin, a partner at Global Vision Advisors in Hingham, Mass., which has a focus on sustainability, believes programs such as green auto loans go a long way to moving consumers into more environmentally friendly vehicles.

“Economic incentives can make all the difference between people taking action or not taking action,” Durkin says.

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