New vehicle sales have been strong throughout 2012 as the average age of cars in the U.S. hits an all-time average age high of 11 years old and as high gas prices persist. As of June 2012, new vehicle sales were up 18.3% from June 2011. These sales trends have brought growth to credit unions’ new auto loan portfolio for the first time since the third quarter of 2007 despite heightened competition from captive finance companies.
New auto loan balances improved 66 basis points annually as of the second quarter, rising $395 million to $60.5 billion from June 2011. Faster growth was posted in used auto loans, as they increased 7.2% as credit unions added nearly $7.5 billion in used auto loans from the June 2011. Credit unions logged nearly 15 million auto loans as of the second quarter, an annual increase of almost 146,000 loans.
Despite renewed competition in auto lending and ongoing 0% financing offers, auto loan market share for credit unions has improved annually. Credit unions nationally saw year-to-date market share rise from 14.2% in June 2011 to 15.0% in June 2012. New auto loan market share has particularly been boosted by the increased sales, with year-to-date market share for credit unions up 2.1 percentage points to 11.7% of all new auto loans in the first half of the year. Additionally, year-to-date used auto loan market share increased 18 basis points from June 2011.
Credit unions can use the auto loan penetration rate to measure how many of their members have an auto loan with the credit union. In spite of increasing auto loan balances and stronger market share, credit union auto loan penetration declined 40 basis points annually in June 2012 to 15.9%. The average auto loan balance for credit unions was $11,546 as of June, up 3.8% from a year prior.
Indirect lending is increasingly popular with credit unions as they are working with dealers, rather than directly with members, to build a reputation in select marketplaces and reach out to new members. The ratio of outstanding indirect loans to outstanding auto loans credit unions was 43.1% at the end of June. This has increased three percentage points over the past five years, as indirect loans were only 40.1% of auto loans in June 2008. Indirect loans are quality loans for credit unions, as indirect loan delinquency stood at 67 basis points at the end of the second quarter, well below the overall delinquency rate of 1.21%.
Consumers will likely continue to buy new vehicles to replace their old, less fuel efficient ones, especially if gas prices remain high. This trend offers a continued opportunity for credit unions, whether via direct or indirect channels, to help members finance either new or used vehicle purchases in the second half of 2012.