ONTARIO, Calif. – The auto lending picture continues to improve for credit unions, as auto loans made up 32.9% of total outstanding balances in the second quarter of 2015.
Jose Torres, market research analyst for CU Direct, told the audience at the company’s quarterly “State of the Credit Union Auto Lending Market” webinar that CUs captured one in four auto originations in the second quarter of this year – closing the gap with both captives and banks.
“For indirect loans, credit unions more than doubled balances from 2005 to 2015,” he said. “In 2015, other than August, each month has had a year-over-year increase.”
The numbers for CUs are almost universally strong: In the second quarter, credit unions saw total auto loan balances jump to $248.1 million from $214.9 million in the same period of 2014. This increase comes with even lower delinquency and charge-off rates, which are at historic lows and are better than rates at competing lenders. In Q2 only 0.29% of CU loans were 60-days delinquent, down from 0.31% in the same quarter last year and lower than the 0.38% rate posted by captives and 0.50% at banks in Q2 this year.
The auto industry as a whole has been booming in recent years, Torres continued. In 2015, new car sales are up 5% year to date, and total sales are up 2.7%. “The first three quarters of 2015 generated more volume than 2009, 2010 or 2011, but growth may have plateaued,” he added.
Plateau or not, the all-time high of 17,395,000 units sold may fall this year, Torres noted. Current estimates call for 17.6 million in sales in 2015.
Trucks/SUVs Hot, Large Cars Not
Trucks and SUVs are dominating new automotive sales, while the car segment is declining – especially large cars. Torres said consumer confidence has risen slowly but steadily over the last three years, which has helped boost sales.
Other trends to watch involve leasing and ever-lengthening terms. Torres said in 2009, only 11.9% of automobiles were leased. In August 2015, 26.8% of auto deals were closed with a lease. As for terms, more than half of recent auto loans by credit unions had terms from 73 months to 84 months.
Both of these trends are being driven by the same factor: buyers want a monthly payment that fits their budget.
“Consumers want affordable payments on their desired cars, which is why you see more leases and longer terms on loans,” Torres assessed, stating he expects leasing to remain strong through the end of 2015 and into 2016.
With all this success, Torres offered two pieces of advice to CUs looking to increase their auto lending programs: be quick and get the word out.
“Credit unions that respond faster have the best chance to capture loans, so auto-decisioning is critical,” he said. “Credit union membership is growing, and one in four members now has an auto loan. Be sure to let current members know auto loans are available.”
CU Direct now is the third-largest U.S. auto lender by originations, trailing only No. 1 Ally and No. 2 Wells Fargo.
