ONTARIO, Calif.-Predictions that 2012 would see a strong boost in new car sales apparently are proving to be true.
According to the latest national car sales numbers obtained by Credit Union Direct Lending (CUDL), the seasonally adjusted annual rate (SAAR) for new car sales hit 15 million units in February and is still above 14.5 million. That is markedly above 12.7 million units, where the U.S. auto market finished 2011.
"This is generating a lot of discussion that new car sales will hit 16 million (SAAR) a lot sooner than expected," said Joe Greenwald, CUDL's SVP of CU solutions. "Forecasts have said the U.S. would reach 16 million maybe three or four years out. It looks like we could reach 16 million in a year or two."
Experts had predicted that Asian automakers would rebound from the natural disasters that wracked Japan and would get inventories-and discounts-back to normal levels in early 2012 (Credit Union Journal, August 1). Analysts also surmised that pent-up demand due to car buyers hanging onto their vehicles longer would begin to drive new car sales in January and through tax-return season. All those things are happening, plus a rise in consumer confidence, said Greenwald. In addition to increasing car sales, the amount financed for both new and used cars has been rising recently, CUDL data shows.
Overall, it's been a solid start to 2012 for CU auto lending, reports CUDL. After hitting a monthly low of 15.2% in March of last year, credit union auto lending market share has risen and remained above 17% each month since May of 2011. Credit unions' year-to-date auto lending market share was at 17.4% early in the first quarter. CUDL credit unions increased unit loan volume 40% in both January and February of this year.
With competition increasing, credit unions apparently are reacting by reducing rates, according to CUDL data that shows the average new and used rates for all CUDL CUs, averaged across all risk categories, has declined from a year ago. New car rates are at 4.54%, down from 4.97% a year ago. Used car rates have fallen to 5.69% from 6.05%. Used car sales are expected to reach 45 million units by the end of the year (CU Journal readers can get additional rate average information at www.cujournal.com under the Rate Tracker tab.)
But dropping rate is not always the answer, stressed Greenwald, who emphasized that rate competition varies significantly across markets. "We hear that in some areas of the country credit unions are getting very aggressive with rate, and then in others we know that CUs are saying the competition is too fierce to drop down and compete."
Greenwald reminded there are other options to increase new car sales. "You need to communicate, make members aware of your auto loan program, do preapprovals, work dealer relationships . . . This is not the time to sit on your hands. There is opportunity. It's much different than a year ago. People are buying now."
For additional info: Manufacturer Incentives May Be About To Return, Bigger Market, Bigger Fight, Get Marketing Plans In Place For Auto Loan Uptick, www.CUDL.com.
