Credit unions are showing their strength in the auto lending marketplace in 2016. New car sales are up 3%, making 2016 look much like 2015 — a record year in which the auto industry sold 17.5 million new vehicles. For 2016, 17.7 million new auto sales units are projected by year’s end.
Credit unions have capitalized on banner vehicle sales over the past year 18 months and continue to grow auto loans and further strengthen their marketplace presence.
During its quarterly State of the Credit Union Auto Lending Market webcast, CU Direct took a closer look at credit union performance in the auto lending arena and how indirect lending continues to be a key driving factor in credit unions growing their auto loan portfolios.
The Case For Credit Unions
Auto loans comprise one-third of credit unions’ portfolios and are the fastest-growing loan segment. At the same time, the indirect lending channel is the largest source of that growth. Over the past five years, credit unions have almost doubled their indirect lending, from $70 billion in 2010 to $137 billion in 2015, growing at a 14.4% compound annual growth rate. Increasingly, credit unions are realizing the necessity to be active and more engaged in indirect lending or they risk losing loans.
Credit unions continue to narrow the gap with both captives and banks, capturing one out of four auto loan originations in the market: $154 billion of the $620 billion in auto originations in year 2015, a 20% year-over-year increase from 2014. In 2015, auto loans made up 33% of total outstanding balances for credit unions, up from 32% in 2014.
Moreover, even as major players such as Ford Motor Credit, Toyota Financial, and Capital One reported market declines of 18.6%, 7.6%, and 3.1%, respectively, from March 2015, credit unions posted strong growth.
Credit unions as a whole have grown market share in 2016 (through April) to 21%, up from 20% in April 2015, and for the second year in a row taking share away from banks and captives to become the No. 2 lender type. Banks have experienced a decrease in market share since 2011, falling from 40.6% market share to 36% in 2016. Similarly, captives have seen their share of the auto lending pie decrease, going from 19.9% market share in 2013 to 16.8% share YTD in 2016.
As a further testament to credit unions’ ongoing rise in the auto lending marketplace, the 1,000-plus credit unions on CU Direct’s CUDL Lending Platform, as an aggregate, are leading market place growth in 2016, with 16% year-over-year growth to date, and generating more than 252,000 auto loans through the first quarter.
CU Direct’s credit unions continue to have a strong presence in the marketplace as the No. 3 auto lender in the United States — climbing from the nation’s No. 7 lender in 2010 — outperforming major marketplace players, including Chase Auto Finance, while trailing only Wells Fargo and Ally, respectively.
Indirect Lending’s Increasing Value
The Indirect channel continues to play a vital role in helping credit unions not only grow auto loans but also acquire new members. Through April of this year, 61% of auto loans through the CUDL System were to new members joining at the dealership, with 39% of loans going to existing members. New members financed 65.3% used vehicles versus 31.3% new vehicles (3.4% other), while existing members financed 55.7% used versus 27% new vehicles, with 17% financing other.
On a national level, the indirect auto lending channel has helped credit union membership grow to include 104 million members, with more than 25% of those members now having an auto loan.
At the fourth quarter mark of 2015, credit unions increased total auto loan balances to $264.5 billion from $232 billion during the same period in 2014. Yet, despite tremendous loan growth, credit unions continue to post the marketplace’s lowest delinquency and charge-off rates. As of the fourth quarter 2015, only 0.37% of credit union auto loans were 60 days delinquent — flat versus 0.37% in fourth quarter 2014 — whereas banks and captives posted 0.62% and 0.51% rates, respectively, during the same time frame.
Auto lending continues to be a bellwether for credit unions as the fastest growing loan type. Credit unions are not only competing in the auto lending arena, they’re outperforming much of the marketplace, growing their market presence, capturing more loans, and driving membership through the indirect channel.
Bill Meyer is public relations/corporate communications lead for CU Direct.