With Auto Loans, Credit Unions Hit The Gas

From higher loan balances to lower delinquency rates, credit unions outperformed all other auto lenders in the first quarter.


Credit unions are more than holding their own against banks and captive finance companies by using competitive rates to claim a bigger market share of new and used auto loans. According to AutoCount data from Experian Automotive that Callahan & Associates analyzed, credit unions’ year-to-date market share for auto originations in the first quarter of 2014 stands at 15.3%, up a percentage point from the first quarter of 2013.

Competitive rates at credit unions helped drive lending activity in the first three months of 2014. While the rates for new and used auto loans from all lenders rose in the first quarter compared to a year ago, the rates at credit unions declined, contributing to the industry’s lending surge. According to Peer-to-Peer Analytics, the average interest rate for new auto loans decreased 29 basis points during the past 12 months to 4.06% as of March 2014. Similarly, the average interest rate for used auto loans dropped 22 basis points to 5.27%. Compared to the combined average rate for all US lenders of 4.54% and 9.01% for new and used auto loans, credit unions reported rates of 4.06% and 5.27%, respectively.

Data as of March 31, 2014, for all credit unions and auto lenders in the US
© Callahan & Associates | www.creditunions.com

Source: Peer-to-Peer Analytics by Callahan & Associates
and Experian Automotive

The accelerating momentum in auto lending activity also boosted consumer loan originations at credit unions, which grew 10.2% during the first quarter to top $48 billion. Auto loans accounted for roughly two-thirds of consumer loan originations for the period.

The credit union industry’s outstanding total loan balances are up 8.8% from March 2013, with auto loans increasing at the fastest annual rate of 12.2% for all loan products. This marks the first time since the recession that auto loans posted double-digit growth. Among all loan categories, new auto loans this quarter had the largest percentage increase compared to the previous March, rising 13.8% to $74.1 billion. This is the second consecutive year that the growth rate for new auto loans has exceeded that for used auto. As the second largest component of the industry’s loan portfolio after first mortgages, used auto loans increased 11.3% to top $131.4 billion. Credit unions recorded the highest outstanding auto loan balances in the industry’s history for the first quarter: $205.5 billion. Overall auto loan concentration increased to 31.1%, up a percentage point compared to March 2013.

 Data as of March 31, 2014, for all credit unions in the US
© Callahan & Associates | www.creditunions.com

Source: Peer-to-Peer Analytics by Callahan & Associates

Longer term loans and a rise in rates in higher risk segments have become more prevalent this year, raising concerns about the possibility that some lenders could incur higher losses from subprime auto loans. Credit unions, though, are making not just auto loans but good loans. Auto loan delinquency, a new addition to the 5300 call report as of the second quarter of 2013, was 0.53% in March 2014, the lowest delinquency rate for all loan products. Moreover, according to Experian Automotive, credit unions are reporting the lowest 30-day and 60-day auto loan delinquency rates for all lenders, which include banks and captive finance companies. In addition, credit unions are the only category of lender to report an annual decrease in the average charge-off amount for auto loans, which was $6,865 compared to $7,328 a year ago. That average charge-off amount was also the lowest for all lenders.




Aug. 4, 2014



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