Auto Lending Trends Provide Credit Unions with Opportunity

Even as the automotive industry continues to struggle, there is light at the end of the tunnel for credit unions as certain trends begin to reverse


The fact that the automotive industry has been having a tough year is not news. As forecasts show this decline continuing into 2009, the major question then becomes: Are credit union auto lending trends tied to these declines in vehicle sales, or do they create an opportunity for credit unions to drive growth? I believe it's the latter. Here's why:

Bucking the National Trend

While it may seem as though credit unions are at the mercy of slowing vehicle sales, as we head into the second quarter certain trends may be showing us that this is not the case. Although vehicle sales continued to decline in April and May, credit union market share sharply bucked this trend. Credit union's share of the auto lending market jumped from 12.9% in March up to 15.1% in May. This increase is not only the largest single-month market share gain in nearly two years, but also an 8-month high for credit union share. These data points show that while credit unions are still affected by factors in the external market, credit unions are positioned to succeed in the auto lending arena thanks to competitive rates, online auto research, “green” auto loans, and other products and services that their members continue to find useful and in demand.

Credit Union Auto Lending Slows In First Quarter

Although the above trends are positive for credit unions, I would be remiss if I didn't also note that not all the news surrounding credit union auto lending is so positive. Credit unions certainly felt the impact of this slowdown in auto lending as credit union auto lending stalled at the end of 2008 and then finally turned negative in the first months of 2008. As of March, credit union auto loan balances had fallen 1.4% from the previous March. The impact of vehicle sales was enough to drive new auto loan growth to -4.7% for the year ended in March of 2008. Although there was growth in the used auto loan segment of the portfolio, the 2.0% growth was not enough to fully offset the decline in new auto balances. These trends however do show that members are interested in moving to more reasonably priced or fuel-efficient vehicles now that many are having more difficulty making higher payments due to issues in the mortgage and job markets, which again presents an opportunity for the credit union that is willing to react.




June 30, 2008



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