Auto Lending Is Still Slow In The Third Quarter

Declines in consumer loan demand and a continued pullback from indirect lending programs have resulted in a deceleration of auto loan growth, particularly in new auto loans.

 
 

In the third quarter, total vehicle sales in the United States bounced back from a dramatic slowdown induced by COVID-19 in the second quarter of 2020.

According to FRED Economic Data from the Federal Reserve, total auto sales increased from a seasonally adjusted annual rate (SAAR) of 9.1 million in April to 16.7 million as of September. Nationwide quarantines and stay-at-home orders pushed consumers to adopt a more conservative attitude toward debt. Consequently, the overall demand for auto loans, particularly for new vehicles, decreased. Low interest rates helped to partially offset this decline in demand, particularly in used auto lending, which has fueled auto growth in 2020.

Key Points

  • Year-over-year, auto loan balances expanded 1.2% as of Sept. 30, making this the slowest third quarter rate for credit unions since 2011. Used auto loan balances grew 4.4% annually, whereas new auto loans contracted 3.7%. This is partly the result of a spike in used car prices in the third quarter.
  • Total auto loan balances neared $383.0 billion. As of Sept. 30, they comprised 32.8% of total loan balances held at credit unions nationwide.
  • Indirect loan growth slowed 3.0 percentage points annually to 1.7% as credit unions continued to slow the rate at which they originate auto loans through third-party dealerships.
  • Auto loan penetration was 21.1% as of the third quarter. This is down 22 basis points year-over-year. Still, auto loans exhibit the highest penetration rate of any loan product on the credit union balance sheet.


The Bottom Line

As the economy battles the effects of the COVID-19 pandemic, auto lending across the country has slowed. Declines in consumer loan demand and a continued pullback from indirect lending programs have resulted in a deceleration of auto loan growth, particularly in new auto loans. The average auto loan balance held by a credit union member is down annually as members gravitated toward used products despite the fact used car prices reached near-historic highs in September. Total auto loan delinquency was 0.44% as of the third quarter, the lowest rate ever reported.

How Do You Compare?

Are your auto lending strategies working? It takes minutes to compare various aspects of your auto lending portfolio to other credit unions with Peer-to-Peer. Compare against credit unions in your state, asset range, or auto lending business model.

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Dec. 21, 2020


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