5 Remarkable Trends In Auto Lending

After the impressive gains in auto loan portfolios last year, credit unions may be poised for an even better 2013.

 
 

Start your engines, ladies and gentlemen, because new auto lending is back. The category finally ended its long drought in the second quarter of 2012, posting its first annual increase since the recession began in 2007, before closing out the calendar year with a slew of impressive numbers.

The resurgence in loan growth should continue in 2013, when new vehicle registrations -- a key indicator of auto sales -- are expected to reach 15.3 million, according to the Wall Street Journal. Credit unions are well positioned to capitalize on those auto sales as more consumers make cooperatives their primary financial institution. For a glimpse of the record auto lending that could be in store for credit unions this year, consider these five remarkable trends for the industry’s auto loan portfolio in 2012. All numbers for the year are as of December 31.

1. New Auto Loans Outpace Lending for Used Cars

Credit unions increased their loan portfolio for new cars 9.2% to $62.8 billion, the fastest growth for the category since the second quarter of 2006. That increase even surpassed the 8.5% growth in loans for used vehicles, which totaled $114.4 billion at year-end. Total outstanding auto loans at credit unions were $177.2 billion.

NEW VS. USED AUTO LOAN GROWTH & TOTAL AUTO LOAN GROWTH
Data for 6,508 FirstLook Credit Unions as of December 31, 2012

NEW-VS-USED-AUTO-LOAN-GROWTH-_-TOTAL-AUTO-LOAN-GROWTH

Generated by Callahan & Associates' Peer-to-Peer Software.

2. Average Auto Loan Balance Rises

Auto loan balances averaged $11,791 for the year, up a strong 4.7% from the growth in new auto loans, which typically have larger balances than loans for used cars. The average balance for new auto loans grew a whopping 10.3%, from $14,538 to $16,035, in 2012. Loan balances for used cars averaged $10,297, up 2.7% from the year before, according to FirstLook Credit Unions.

AVERAGE AUTO LOAN BALANCE
Data for 6,508 FirstLook Credit Unions as of December 31, 2012

AVERAGE-AUTO-LOAN-BALANCE

Generated by Callahan & Associates' Peer-to-Peer Software.

3. Penetration Declines As Membership Grows Faster Than Loans

Auto loan penetration, a measure of how many members have an auto loan with their credit union, dropped from pre-recession levels to 16.1%, but there’s a silver lining to that number. The most likely explanation for the decline is the recent record-setting membership growth credit unions are experiencing. Since 2009, membership has grown annually at a compounded rate of 2.4%, while the percentage of auto loans increased only by 20 basis points.

AUTO LOAN PENETRATION
Data for 6,508 FirstLook Credit Unions as of December 31, 2012

AUTO-LOAN-PENETRATION

Generated by Callahan & Associates' Peer-to-Peer Software.

4. Market Share Increases But Falls Short Of Recession Peak

Credit unions made 15.2% of all auto loans in 2012, up from 14.6% in 2011. That market share was below the peak of 19.5% in 2009 at the height of the recession. When banks curtailed their lending during the recession, credit unions continued making auto loans, capturing a significant portion of the market. Although today’s market share is lower, credit unions continue to compete with the low rates and great deals from dealers and captive financers. In 2012, credit unions captured 11.8% of the market for new car loans and 20.3% for used car loans.

CREDIT UNION AUTO LENDING MARKET SHARE
Data as of December 31, 2012

CREDIT-UNION-AUTO-LENDING-MARKET-SHARE

Generated by Callahan & Associates' Peer-to-Peer Software.

5. Ratio of Indirect To Outstanding Auto Loans Matches Record High

Indirect auto lending, in which credit unions work with dealers instead of members to make loans, has been popular with credit unions since the recession. The ratio of indirect loans to total auto loans was 43.9%, matching the record high in 2009. Indirect loans typically have much lower delinquency rates than other loans. For the fourth quarter the delinquency rate was 78 basis points.

INDIRECT LOANS TO OUTSTANDING AUTO LOANS
Data for 6,508 FirstLook Credit Unions as of December 31, 2012

INDIRECT-LOANS-TO-OUTSTANDING-AUTO-LOANS

Generated by Callahan & Associates' Peer-to-Peer Software.

 

 

 

March 4, 2013


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