LAS VEGAS -
Paul Taylor, the chief economist for the National Automobile Dealers Association (NADA), said auto sales recently have seen shifts to more fuel-efficient makes due to the high price of gasoline. Still, he said, total sales remain near $1 trillion per year in the United States, making autos the largest retail business in the country.
"Used car loans remain important lending opportunities for credit unions, along with new car loans," Taylor said at CUDL's Auto Lending Symposium here. "I think opportunities in subprime auto lending will continue, as long as regulators don't overreach."
According to Taylor, CUs enjoyed growth in their auto loan market share from 2003 through 2005. From 2005 to last year there was a small drop-off, but credit unions still originated 18% of total loans.
Several trends point to continued strong auto sales, he continued. The number of licensed drivers in the U.S. is growing, although at a slower pace than in recent years. The number of vehicles per household has trended up for the past 40 years. First quarter GDP growth was slow, which usually brings slower auto sales, but the employment outlook is strong and U.S. net financial assets per household are rising, both of which are favorable indicators.
Also important, Taylor asserted, is the NADA Dealer Optimism Index has been steady. "This usually is a good predictor of future sales," he said.
The retail gasoline market has seen price increases in each of the last three summers, which in turn hurts auto sales, Taylor explained. He said economic growth in China, India and countries formerly part of the USSR has led to a much larger demand on the world oil supply and a subsequent increase in the price of crude oil.
In the U.S., a significant portion of the price Americans pay for gasoline can be attributed not to oil, but to the problem of licensing and building refineries.
"The lack of finished stocks in gasoline causes summer price spikes," he said. "High gas prices reduce household income and total light vehicle expenditures. However, several analysts think the Memorial Day prices were at or near the peak for the summer. As refineries catch up, prices should be $1 per gallon lower by October. That would lift values for SUVs, trucks and larger cars."
It only takes one refinery fire or shutdown to keep gas prices elevated, he warned.
