Auto Metrics in Texas Cruise above National Levels

Texas cooperatives have a higher penetration rate, average new auto balance, and new auto market share than credit unions nationally.

 
 

Auto loans produce consistent yields, have a broad market appeal, and can be highly profitable. As such, they are an efficient use of credit unions' operational resources. The credit union auto loan market share is larger than that of other lending markets, and for many credit unions, auto loans are a primary source of income.

Texas credit unions are posting stronger auto lending numbers than their national peers. In 2010, the auto loan penetration rate of Texas credit unions was 20.9% compared to a penetration rate of 16.4% for credit unions nationally. US credit unions posted an average outstanding new auto loan balance of $8.5 million in 2010; Texas credit unions more than doubled that at $19.7 million. According to Experian Automotive, Texas credit unions are capturing one of the largest percentages of new auto market share, 17.2%, in the country. Credit unions — including those in Texas — that have generated strong yields from new auto loans have used competitive rates and targeted marketing to secure new auto market share from captive finance companies and other financial institutions.

Source: Callahan & Associates' CUAnalyzer

Although they are a significant portion of the credit union balance sheet, auto loans do not come without risk, which is why credit unions must have solid risk control procedures. Auto loans do not necessarily build strong member relationships, and the market place is competitive. Successful auto lending credit unions generally have established dealer relationships (either through buying programs or indirect lending programs), solid risk management policies and procedures, several lending delivery channels, and an effective marketing and sales program.

 

 

 

April 21, 2011


Comments

 
 
 
  • Andrew--thank you for this article and your March 28th piece on CU auto loan share.

    I did seize on one sentence in today's post that got my attention... "Auto loans do not necessarily build strong member relationships, and the market place is competitive." Might I suggest that USED AUTO LENDING might just be the best way for CUs to build a relationship with Gen Y!



    Notice that I said a USED AUTO LOAN. For the third year in a row, Deloitte's Automotive Gen Y Survey revealed that over 70% of Gen Y said they would opt for a USED AUTO. And yet, most every article I see in the CU "trades" seems to focus on the fact that CU "new" auto loans are "down"(because of stiff competition from the captives and banks). But USED AUTO lending is up! I say GREAT!



    If 7 out of 10 Gen Y auto buyers will be buying USED, isn't this a prime opportunity for CUs to begin a relationship with this most sought out demographic? And to do so via their "first" life event. I can tell you from personal experience(I sold cars for a year), that car dealers forget about a customer the minute they take the wheel of a new or used car.

    May I also suggest that CUs support that USED AUTO purchase by offering more resources "after the sale"...like car care and repair. And affordable USED CAR pre-inspections should be of great value to Gen Y and their parents (who might very well be co-signing for the loan). Most CU Auto Centers offer resources geared more for NEW AUTO purchasing.



    From what I read, waiting til college age to connect with Gen Y is way too late. Credit unions have a golden opportunity to connect with Gen Y via their first "life event"...an auto loan. And there is a 70% chance that loan with be for a USED vehicle.





    Roger Conant