Indirect Lending Slips but Remains a Key Component of Auto Lending

The sole component of the lending portfolio that did not experience growth over the past year was new auto loans. For many credit unions, indirect lending is a key component of their new auto loan strategies.


At the end of June, credit unions reported $70.8 billion in outstanding indirect auto loans. This resulted in a 1.1% decline in indirect balances from the $71.6 billion reported in June of 2007. As record fuel prices combine with other market factors to place additional pressure on consumer wallets, new vehicle sales have continued to decline. This decline has clearly had an impact on indirect lending at credit unions, as 2008 marks the first time we have seen indirect loan growth turn negative since credit unions began reporting this figure in 2004.

While these declining balances, and the accompanying struggles in the auto sales market, may make it appear that credit unions are stepping back their indirect lending efforts, this is not actually the case. In June, 1,886 credit unions reported outstanding indirect loans on their balances sheets. This marks an increase of just under 70 credit unions from this time one year ago. Additionally, as total auto loan balances fell at a faster rate than indirect lending, indirect loans have increased their percentage of the total auto loan portfolio to 40.1% at mid-year. As vehicle sales slow, it becomes increasingly important for credit unions to capture financing for the vehicles that are being purchased, and indirect lending is becoming a more popular strategy in that arena. Although indirect lending is not solely responsible for the increase, it may have been a contributing factor in the 2.5% increase in auto lending market share that credit unions have captured since the beginning of the year.

Related Resources

For more information on the external auto sales market and its potential impact on credit union lending trends, check back with on Monday to read an in-depth article on that subject.
Learn how credit unions are capitalizing on current market trends to drive growth into their auto loan portfolios in numerous unique and innovative ways, by joining us for our upcoming webinar, Back in the Fast Lane: 10 Strategies to Spike Auto Lending.




Sept. 22, 2008



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