ONTARIO, Calif.—Auto lenders are ready for a rising-rate environment, with car loan rates already creeping up, according to the latest data from CU Direct.
Jose Torres, senior business analyst at CU Direct, reported that rates through August have inched up this year an average of 31 basis points across the board for all credit scores.
But that is not negatively impacting CU auto loan balance sheets, as credit unions continue to strengthen their position in the auto loan market, a trend started during the recession.
During its latest State Of The Credit Union Auto Lending Market report, CU Direct reported that credit unions now are responsible for 19.8% of the total auto loan market share, a 50-basis-point increase from 2014.
“More important, credit unions are now the second-largest lender type, a positon previously held by the captives,” said Torres.
CU Portfolios Grow 23%
CU auto loan portfolios have grown 23% this year compared with 13% growth for the overall auto lending industry. That figure is second only to finance companies, which grew at 27%.
What may be a better sign of credit unions’ auto lending success, said Torres, is that CUs now claim a greater share of member auto loans—holding one out of four members’ car loans today, compared with one in five in 2011.
The data shows that indirect continues to become a larger share of what is driving CU auto loan growth. At the close of Q2 2015, credit union indirect auto loan outstandings stood $125.4 billion, up $23 billion from a year earlier. “That is an impressive 22% year-over-year growth rate,” said Torres.
Torres noted that among all auto lenders, credit unions make a higher percentage of their loans to subprime borrowers, however their delinquencies remained the lowest in the industry. Overall CU delinquencies (.29%) are down from 2014 (.31%). Indirect delinquencies have fallen as well in the past year, dipping to .58% from .61%.
Terms Continue To Lengthen
“We continue to see lengthening of terms,” said Torres. “Now half of all the new cars financed are for 73 to 84 months. We attribute that to car prices rising and consumers wanting to keep their payments down.”
With payment on the minds of consumers, leasing continues to grow, said Torres. Leasing now claims 26.8% of all new car financed through August, up from 25.2% a year prior.
Torres forecast that the outlook for auto lending is good for 2016, with new car sales expected to be on pace or slightly higher than 2015.
“We expect new car sales to come it at 17.4 million units through December, which is up slightly from projections made at the start of 2015,” said Torres. “Next year projections have new car sales totaling 17.6 million units.”
But the pace of growth for new car sales won’t equal what is expected to be a record-setting year in 2015, said Torres.
“The first three quarters of 2015 generated more new car sales volume than each of the previous four years,” said Torres. “The industry is on pace to top the all-time high of 17.395 million units set in 2007.”
As a group, CU Direct credit unions this year rank as the third-largest auto lender in the country (707,396 total loans through August), trailing only Ally (799,870 total loans) and Wells Fargo (761,811).