At last month’s Governmental Affairs Conference we asked a number of credit union executives what their major focus was going to be in 2010. One resounding answer that came back time and time again was “consumer lending.” This doesn’t come as much of a surprise, as auto lending is still considered by many to be the bread-and-butter of the credit union lending. As credit unions renew their focus on consumer loan volume and competition heats up again 2010 is shaping up to be a compelling year for vehicle financing.
Credit Unions Capture Record High Auto Lending Market Share
Credit unions originated record-high loan volume in 2009, in contrast to many trends that were affecting other financial institutions. While refinances were the driver of much of the volume, there was some surprising success in auto lending. As external market difficulties reduced lending from larger banks and captive financers, credit unions remained active and as a result increased their share of the vehicle financing market.
Credit unions reported record levels of market share on both a monthly and year-to-date basis in 2009. The share at the end of 2009 stood at 20.0%, up nearly four percentage points from the 16.1% share credit unions reported at the end of 2008. The successes came in the beginning of the year, as in January 2009 credit unions posted the highest one-month share of 22.7%. Heightened competition and return of many captive financers in the second half of the year cut into these market share gains. But credit unions still finished 2009 financing one in every five vehicle loans made during the year.
Balances Remain Stagnant As Sales Decline
Although credit unions gained ground in their share of the auto lending market in 2009, they did not report increases in the total dollar volume of booked auto loans. As of December, credit unions held a total auto loan portfolio of $175.4 billion. While this number is on par with balances from the previous year, net auto loan volume did decrease 1.6% since December 2008.
Click image for a larger view.
The decline in auto loan balances pales in comparisons to declines on the national landscape, as total vehicle sales slid 21.2% during the same period. The decline in vehicle sales was most prevalent in new auto loan balances. Credit union totals fell 7.9% from December 2008 to December 2009. However, even as new balances continued to decline, credit unions were able to quickly respond to a shift in consumer demand and make financing available for the traditionally lower-priced used auto loans, which grew 3.9% during the year.
Auto Financing Competition Heats Up
While credit unions made strides in the auto loan market in 2009, they need to remain active and innovative in order to avoid losing the gains as competition heats back up. A recent story in the Detroit Free Press detailed the increasing battle between returning captive financers and their zero-percent financing and smaller lenders. As zero-percent offers return from domestic auto makers and foreign manufacturers, credit unions will see their market position challenged. However, credit unions do have strong momentum and the industry is positioned well to adapt auto loan offerings focus on the member relationships built during this period of financial instability.