Credit unions might try to focus more on refinancing auto loans as more members hold on to their old vehicles.
I’ve had my little white Wrangler, Pearl, for 10 years now. As of this week, she’s logged 187,000 miles. Her radio is missing a knob, she’s running a little noisy, and she could use new carpeting. Plus, one of my friends put a hula girl sticker on the back that I can’t get off. But other than that, she’s just fine.
I have no plans to upgrade to a new car anytime soon and according to recent reports, I’m not alone. Drivers in my Washington D.C.-area are holding on to their cars for much longer these days, with the average age of a registered passenger car this year being 9.25 years, up from 8.23 years in 2005, according to a report in the Washington Examiner, which cites data from the National Capital Region Transportation Planning Board.
Drivers seem to be settling for their older cars nationwide. Nearly 80% of respondents to an AutoMD’s Mileage Survey said they planned to drive their current vehicles for 50,000 miles more than they did their previous vehicle. About 20% more drivers said their current car had logged 100,000 miles than the number of drivers who reported that mileage in 2010, according to AutoMD.
For credit unions, that could translate into more declines in new car loans as fewer people buy new cars, but this local study shows that’s not necessarily the case. In the past six years, vehicle registrations increased 2.9% in Washington D.C. from 2008 to 2011, when nationwide they rose 4.1 percent. However, new car sales in recent months have been mixed, according to data from Motor Intelligence, a research group based in Woodcliff Lake, NJ.
In October, General Motors reported a 1.8% sales increase over October 2010, Ford Motor Company reported a 6.2% increase and Chrysler reported a 27% increase. During that same time period, Toyota Motor Sales reported a 7.9% decline in sales, Mitsubishi reported a 14.3% drop and American Honda Motor reported a 0.5% drop, according to Motor Intelligence.
The nation's credit unions reported that new auto loans declined by 12.6% as of June 30,2011 from the same time the year prior, while used car loans rose 4.0%, according to Callahan & Associates' Peer-to-Peer software.
No matter what the new car sales trends are, credit unions can continue to seize on refinancing opportunities for auto loans, as Associated Credit Union ($1.3B, Norcross, GA) is doing by promoting its 2.99% rate and Pentagon Federal Credit Union ($15B, Alexandria, VA) is doing with its promotional 1.99% rate.