7 Things To Know About The Auto Market

American consumers have regained their taste for cars, and credit unions are doing their part to become the lender of choice.


The United States automotive industry was hit hard by the recession, with the effects resonating well beyond major manufacturers and suppliers, evidenced by stagnant loan portfolio growth and depressing earnings at financial institutions throughout the country. However, in recent years, the industry has roared back to life, and with it, the market for new and used vehicle financing has reemerged as a welcomed source of income for credit unions, banks, and other financial institutions. Below are some highlights of the American automotive recovery and how credit unions have benefited from the return to business as usual.

1) People Love Their Cars Again

In the first half of 2015, the U.S. auto market recorded its strongest six months since 2005. Industry experts project seasonally adjusted annual growth of 17.1 million to 17.3 million vehicles for the year. According to sales tracking firm Autodata Corp., U.S. automotive sales in June were up 4.4% — or 8.5 million vehicles — compared to the same period last year.

The industry hasn't seen numbers like this since before the recession, and a number of factors are contributing to the booming market now. Aging cars, consumer confidence, low unemployment, and near record-low interest rates have prompted more buyers to enter the market. According to a July 2015 study from IHS Automotive, the average vehicle age in the United States hit a record 11.5 years as of June 2015. Now, buyers are re-entering the market to replace older-model vehicles. Depressed gas prices have also led to a resurgence in the popularity of SUVs and light trucks.

2) The Pie Keeps Expanding. So Does Credit Union Market Share.

Data as of 03.31.15
© Callahan & Associates | www.creditunions.com

Source: Autocount

And data from Experian Automotive shows credit unions have steadily increased their market share in both new auto and used lending market, with a dip in used auto lending this quarter, following post-recession lows in 2010.

Data as of 12.31.14
© Callahan & Associates | www.creditunions.com

Source: Experian Automotive

3) Auto Loans Grow 16.8% Through March

Auto loans accounted for 32.7% of the national credit union loan portfolio as of March 2015. That’s an increase of 1.6% over one year ago. . In aggregate, auto loans outstanding at U.S. credit unions increased 16.8% year-over-year in the first quarter of 2015; the number of loans increased 10.4%.

Data as of 03.31.15
© Callahan & Associates | www.creditunions.com

Source: Peer-to-Peer Analytics by Callahan & Associates 

One reason for the shift in the portfolio involves the inherent benefits associated with auto loans in a rising rate environment. Whereas real estate loans have terms of up to 30 years, Experian Automotive reported average loan terms for new and used vehicles were 62 and 66 months, respectively, as of December 2014. Shorter loan durations enable credit unions to more actively manage their interest rate risk by reallocating their balance sheet into less risky shorter term loans, more frequently.

4) Indirect Lending Pulls Even With Direct

Historically, direct loans have accounted for the majority of the credit union automotive portfolio. But since 2012, the share of auto loans made to a member at a dealership has grown. Indirect auto lending activity at credit unions has increased 68.0% compared to 27.2% for direct auto lending over the past three years.

Data as of 03.31.15
© Callahan & Associates | www.creditunions.com

Source: Peer-to-Peer Analytics by Callahan & Associates 

The combination of a surging automotive market and a concerted effort by credit unions and indirect lending-focused CUSOs to capture more of the indirect market have contributed to this growth.

5) Asset Quality Remains Strong

The NCUA has tracked credit union automotive delinquency and charge-offs since the second quarter of 2013, and over that period, credit unions have demonstrated an ability to effectively underwrite and manage the risk of their auto loan portfolios. As of March 2015, the delinquency rate for auto loans at credit unions nationwide was 0.51%. That’s 20 basis points lower than the average delinquency rate for the entire loan portfolio of credit unions nationwide.

Data as of 03.31.15
© Callahan & Associates | www.creditunions.com

Source: Peer-to-Peer Analytics by Callahan & Associates 

Average borrower credit scores are a testament to credit unions’ commitment to sound underwriting. In general, credit unions have mirrored the broader industry in terms of average credit score when writing new auto loans. However, the average credit score of used auto loans originated by credit unions has historically been well above peers, according to data from Experian Automotive.

Data as of 12.31.14
© Callahan & Associates | www.creditunions.com

Source: Experian Automotive

6) Asset Class Stratifies Auto Loan Growth

Generally, larger credit unions tend to have on average, higher loan growth than smaller credit unions. As demonstrated in the chart below, the rectangular boxes represent the 25th to 75th percentiles of the respective peer groups. Although the middle-50 percentiles of larger asset-based peer groups have higher loan growth, the 76th to 95th percentiles of the smaller asset-based peer groups show that smaller credit unions are still achieving tremendous auto loan growth. Of note, the $250 million to $500 million peer group reported the highest growth at the 95th percentile. Read more about this asset class on CreditUnions.com.

Note: The 5th and 95th percentiles represent the lower and upper ranges, respectively. This removes the impact of outliers — such as credit unions that have discontinued or restarted lending programs — as well as the inflationary effect of mergers on the loan portfolio of the surviving credit union.

7) New And Used Auto Growth Varies By State

As of March 2015, the national credit union new and used auto portfolios grew 21.4% and 13.1%, respectively. When analyzing the trend at a state level, 40 states reported new auto loan growth greater than used. California and Mississippi reported the two largest differences between new and used auto loan growth, 23.6% and 22.6%, respectively.


However, in a few states’ used auto portfolios outpaced new. Delaware reported the largest difference between new and used auto loan growth, with 51.5% used growth and 22.5% new growth. And in South Dakota, new auto loans declined 0.7% year-over-year while the used portfolio expanded 7.7%.


How Do You Stack Up?

To learn more about credit union auto lending visit Peer-to-Peer where you can explore:

  • Which credit unions are growing their auto loan portfolios and how fast.

  • How are credit unions structuring their automotive and general loan portfolio.

  • Which credit unions participate in indirect lending and who are the leaders?




Aug. 3, 2015


  • It is great to see that credit unions are being more aggressive in owning the auto loan market. This is not good news though for credit unions who do not have a robust indirect lending presence. Those credit unions are likely missing out as more of their members are financing with other credit unions, banks and captive lenders at the dealership. If you are one of these credit unions and don't have an effective outreach strategy to recapture your members loans being shipped off to another institution, your loan growth is already suffering.