ONTARIO, Calif.—Credit unions in the third quarter continued to advance their share of the auto lending market—at the expense of banks—according to CU Direct.
Credit union’s market share increased to 26% in Q3 from 23%. Bank market share was down by more than 5.5%, bringing banks’ piece of the overall business to 37%.
CU Direct’s third quarter State of the Credit Union Auto Lending Market report shared a story commonly heard this year—that credit unions are continuing to benefit from the banks’ retreat and from CUs’ maturing networks.
“This is a good time for credit unions to review strategies to ensure continued growth and strong presence,” said Michael Cochrum, VP of analytics and advisory services.
Banks during 2017 have been tightening their credit standards, many, including Wells Fargo, retreating from their heavy participation in the subprime space. That tightening of credit continued in Q3, said Cochrum, leading to CU third quarter growth of 11.95%. Banks showed negative growth of 5.58%, and captives were down 1.67%. The only other segment of the market to grow in the third quarter was the buy here pay here lots, up less than 1%.
Cochrum, whose comments came as part of a “State of the Credit Union Auto Lending Market” webinar, pointed out that credit unions are increasing loan originations in a shrinking auto loan market, which is down 4.74% year over year.
Credit unions increased their attention to new car financing in Q3, moving their mix of loans to 30% new, up from 28% last quarter, and 70% used. Cochrum said the mix of new and used vehicle financing at credit unions continues to remain relatively consistent.
CU Direct credit unions, as a group, continued to hold their top spot as the No. 1 lender in the country (849,719 total loans), ahead of Capital One Auto Finance. CU Direct credit unions also posted an industry-leading 18.38% growth rate through September 2017. The growth comes at a time when overall market growth is -4.3%
Turning to leasing, Cochrum noted that signs indicate demand for this car-buying option is leveling off.
Reasons for leasing’s growth stalling, noted Cochrum, is manufacturers’ appetite for leasing is declining as residual values drop, largely due to the flood of high-quality cars coming off lease. Hovering at about 30% of all new car deals at the close of Q3, after reaching a high of more than 31% last year, Cochrum said this could indicate a shift back to installment loans for more lease customers. Cochrum also suggested there could be a market for used car leasing in the future.
Used leasing, which has been in place for years, has not done well, experts have stated, due in part to the difficulty in setting residual values on a used car, whose condition and mileage vary.
Despite all the off-lease vehicles returning to market, 2017 has seen increases in used vehicle wholesale prices, said Cochrum. He said that natural disasters have contributed to demand, elevating wholesale prices. Cochrum urged credit unions to pay close attention to used vehicle conditions, as many flood vehicles are being reconditioned and sold.