Thursday, January 31, 2019

Total auto loan balances at credit unions have more than doubled since the third quarter of 2012

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Auto lending at U.S. credit unions was relatively robust in the third quarter despite rising interest rates and slowing growth in the loan portfolio.

Up 10.8% annually, total auto lending expanded $35.8 billion over the year to $365.3 billion as of Sept. 30, 2018. This is the sixth consecutive year of double-digit growth in the third quarter. Total auto loan balances at credit unions have more than doubled since the third quarter of 2012, and auto lending continues to be strong despite growth slowing and interest rates rising in the overall loan portfolio.

Credit union auto market share has grown 5.9 percentage points in the past five years to 20.6% as of Sept. 30, 2018. With the largest market share of any major loan product, auto loans are essential to balance sheet growth at credit unions.

  Growth in indirect lending continued its three-year decline and was down 3.8 percentage points year-over-year to 15.5%. Still, the financing option remains a major origination pipeline for credit union auto loans. Growth in indirect lending has outpaced total auto lending growth for the past seven years.

Although the average auto loan balance is on the rise, credit unions have effectively managed delinquency. New auto loans have the lowest delinquency — 0.39% — of any lending product at the nation’s member-owned financial cooperatives, and total auto delinquency decreased 5 basis points over the year to 0.60% as of Sept. 30.

Strong vehicle sales in 2018 underpinned performance in the credit union loan portfolio. The National Automobile Dealers Association projects 2018 will be the fourth straight year of more than 17 million unit sales nationwide and is forecasting 16.8 million unit sales in 2019. However, amid a rise in new car prices, consumer demand is shifting from new cars to used ones.

A rise in off-lease used cars and lightly used vehicles are combining to increase the supply of used cars and depress their prices. Elsewhere, SUVs continue to grow in popularity, and some major automakers are refocusing their product line. Ford, for example, has announced plans to stop manufacturing sedans and coupes, except for the Mustang, and produce only SUVs and trucks in North America.

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