Some See a Ongoing Rise in Used Car Values, Some Big Lenders Disagree

DETROIT––Not everyone agrees with those analysts who are forecasting used car values and demand for loans will continue to rise in 2021. In fact, Ally Financial said last week that it is embedding a potential 15% to 20% cumulative decline in used-auto values by the end of 2023 into its assumptions, the Wall Street Journal reported.

“It is natural for lenders and investors to anticipate the end of the current used-vehicle boom, and valuations of banks with big auto-finance businesses seem to partly reflect that,” the Journal reported. “Lenders such as Ally and Capital One Financial are trading at forward price-to-earnings valuations that are relatively low compared with where they normally trade versus S&P 500 banks overall, according to FactSet data.”

The Journal report noted that industry-tracker Cox Automotive has forecast that the Manheim index of used-car prices will be a mere 3% lower by this December than it was in December 2021.

“Perhaps a price decline could accelerate quickly the following year,” the Journal stated. “For the time being, though, things like the supply-chain snarls for chips that are making new cars take longer to build still appear to be a factor. Ally said that, although it is forecasting cautiously, ‘recent trends indicate ongoing resilience’ in used values.”

Tight Inventory

Despite high used-car prices, strong demand and tight inventory at auto dealers, the Journal reported that Ally and Huntington Bancshares both noted upticks in dealer credit utilization in their quarterly updates, “indicative of needing to finance inventory that isn’t instantly moving off the showroom floor. More new cars on lots might lead to fewer buyers winding up in the used-car market.”

Both General Motors and Ford Motor have also steered a way into the used car market via online platforms, the Journal added.

62% of Leases Bought Out

“That same trend of scarce inventory has also likely played a role in more vehicles being bought out at the end of leases—meaning that a lease financing provider isn’t able to take an off-lease car and sell it into the hot market,” the Journal added. “Ally reported that 62% of leases were bought out in 2021, compared with a figure typically closer to 30%, muting lenders’ upside to rising used values to a degree. Falling used-car prices would reduce the gains on selling cars, but they also could lead to more cars winding up in lenders’ hands in the first place.”

Comments

Growing Your Credit Union Without Expanding Your FOM

For many firefighter and other credit union primarly serving first responders, growth often feels tied to one big decision: expanding the Field of Membership (FOM). But what if you didn’t have to? What if growth could come from within —by deepening relationships, increasing engagement, and capturing more of the financial lives of the members you already serve? The truth is: it can. But it requires a shift in strategy. Rethinking What “Growth” Really Means Most institutions define growth as adding more members. But for single-sponsor credit unions, especially those serving first responders, a more powerful definition is: Growth = more value per member Many members only use one or two products—often a checking account and maybe an auto loan. Meanwhile, larger banks capture mortgages, credit cards, and investments. The opportunity isn’t just new members. It’s: More products per member Higher balances per relationship Greater share of wallet Your Biggest Advantage: The First Responder Life...

Read Complete Article HERE>»

When Vendors Price for Giants

Grant Sheehan CCUE | CEO Opinion: When Vendors Price for Giants, They Shrink the Future of Small Credit Unions ! There’s a quiet squeeze happening in the credit union industry, and it’s not coming from regulators or competition from big banks. It’s coming from the very vendors that claim to support the ecosystem. For small credit unions, the problem is increasingly simple and factual: the tools required to compete with digital banking platforms, fraud systems, compliance software, analytics, and payments infrastructure are priced for institutions ten or even 100 times their size. The result is a market where access to essential services is determined not by mission or member need, but by asset size. This isn’t just inconvenient. It’s structurally threatening. Vendors often defend their pricing models as a reflection of complexity or scale. Larger credit unions have more users, more transactions, more integrations, so they pay more, and that seems fair on the surface. But t...

Read Complete Article HERE>»

What should your credit union budget for in 2025?

As we enter the fourth quarter, many credit union leaders are starting to turn their attention toward planning for 2025. With a myriad of options and new technology, it’s crucial to prioritize services that set credit unions apart while encouraging growth. In this article, we explore several key areas credit unions should consider when preparing their budgets for the coming year. Expanding membership One significant trend shaping the financial landscape is the exodus of big banks from rural communities . This presents a golden opportunity to expand membership to new communities. However, this expansion doesn’t necessarily require traditional brick-and-mortar branches. Credit unions can leverage technology to provide services efficiently and cost-effectively. Some alternative service delivery methods include: Interactive Teller Machines (ITMs) : These advanced ATMs allow members to interact with a live teller via video, providing a personal touc...

Read Complete Article HERE>»

Credit Union Lending Picks Up in Most Areas

Credit unions were increasing their portfolios in most areas in June, except business lending and new car loans, where portfolios fell for the 24th month in a row after seasonal adjustments, according to a CUNA Mutual Group report released Tuesday. The Madison, Wis., trade group’s Credit Union Trends Report showed new auto loan balances were $141 billion on June 30, falling at a 3.3% seasonally adjusted, annualized rate from May to June, part of the May-through-October peak car-buying season. Credit unions held $252.4 billion in used car loans on June 30, up 1.2% from May without seasonal adjustments. The Trends Report made slight adjustments to CUNA’s Monthly Credit Union Estimates released earlier in the month. In this case, its changes allowed total auto loan balances to show a slight 0.3% un-adjusted May-to-June gain, compared to being flat in the CUNA report. Steve Rick, chief economist for CUNA Mutual Group and the report’s author, said gains were stronger in other areas, includ...

Read Complete Article HERE>»

Newly Released Fed Minutes Show Policymakers Seeking to be Flexible on Rates

04/13/2023 Tweet WASHINGTON — Newly released minutes from the Federal Reserve’s March meeting show officials are seeking to remain flexible when it comes to future rate decisions. The paradox for the Fed remains that the labor market remains strong, even as inflation continues to be high, although it cooled in March, according to new data from the Bureau of Labor Statistics. “Central bankers have spent more than a year waging a battle against the most painful burst of price increases in decades, raising interest rates to slow the economy and to wrestle price increases under control,” noted the Wall Street...

Read Complete Article HERE>»

Growing Use of Stablecoins Could Reshape How FIs Manage Liquidity, Allocate Assets, NY Fed Report Suggests

NEW YORK — The growing use of stablecoins tied to the U.S. dollar could reshape how banks manage liquidity and allocate assets, potentially leading institutions that support the digital tokens to hold more reserves and make fewer loans, according to a new study from the Federal Reserve Bank of New York . The paper, titled “ Stablecoin Disintermediation ,” was authored by economists Michael Junho Lee and Donny Tou and examines how stablecoin activity affects the balance sheets and liquidity management of banks that partner with stablecoin issuers. The researchers found that while stablecoins rely on traditional banks to function, the relationships can alter the liquidity demands placed on those institutions. Banks serving stablecoin issuers tend to hold larger reserve balances and reduce the share of assets devoted to lending, shifting toward a more reserve-heavy banking model. Focus of Study The study focused on developments following the March 2023 collapse of...

Read Complete Article HERE>»

The FedNow Service will launch in 2023 "Are you ready?"

The FedNow Service is a new instant payment service that the Federal Reserve Banks are developing to enable financial institutions of every size, and in every community across the U.S., to provide safe and efficient instant payment services in real-time, around the clock, every day of the year. Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments conveniently, and recipients will have full access to funds immediately, giving them greater flexibility to manage their money and make time-sensitive payments. Consistent with the Federal Reserve’s historical role of providing payment services alongside private-sector providers, the FedNow Service will provide choice in the market for clearing and settling instant payments as well as promote resiliency through redundancy. Financial institutions and their service providers will be able to use the service as a springboard to provide innovative instant p...

Read Complete Article HERE>»

Rick Metsger reminded credit unions the National Credit Union Share Insurance Fund may be required to increase loss reserves as the values of taxi medallions decline.

A LEXANDRIA, Va. (Dec. 8, 2017) – National Credit Union Administration Board Member Rick Metsger today reminded credit unions the National Credit Union Share Insurance Fund may be required to increase loss reserves as the values of taxi medallions decline. “Prices for New York taxi medallions at two recent public auctions have been considerably lower,” Metsger said. “That, combined with a continued increase in already high delinquency rates on medallion loans, suggests the Share Insurance Fund’s reserves may have to increase in the very near future.” Metsger spoke today to the Oregon Department of Financial Services CEO roundtable in Salem, Oregon. His remarks covered various issues related to credit union regulation and the Share Insurance Fund. Metsger said the NCUA issued a Letter to Credit Unions in 2010, warning of concentration risk , and the agency issued a more specific letter on taxi medallion lending in 2014 . “We have known, and warned ...

Read Complete Article HERE>»

Facial recognition to secure payments will exceed 1.4 billion globally by 2025

BASINGSTOKE, U.K.– The number of users of software-based facial recognition to secure payments will exceed 1.4 billion globally by 2025, from just 671 million in 2020, according to a new study from Juniper Research. “This rapid growth of 120% demonstrates how widespread facial recognition has become; fueled by its low barriers to entry, a front-facing camera and appropriate software,” Juniper said, noting the research identified the implementation of FaceID by Apple as accelerating the growth of the wider facial recognition market, despite the challenges to facial recognition during the pandemic with face mask use. The research recommends that facial recognition vendors implement robust and rapidly evolving AI based verification checks to ensure the validity of user identity, or risk losing user trust in the authentication method as spoofing attempts increase, Juniper reported. Fingerprint Sensors The new research, Mobile Payment Authentication: Biometrics, Regulation & Market Fore...

Read Complete Article HERE>»

Credit unions lending rose at a faster pace in most sectors than the small banks last year, according to data released this week by the FDIC and CUNA Mutual Group.

What credit unions lacked in size they made up for in speed compared with community banks and savings institutions in 2017. Credit unions lending rose at a faster pace in most sectors than the small banks last year, according to data released this week by the FDIC and CUNA Mutual Group. CUNA Mutual’s monthly trends report showed credit unions held $984.8 billion in total loans at Dec. 31, up 10.7% from a year earlier and a growth rate more than twice as fast as community banks. Credit union assets rose 6.3% to $1.4 trillion due to a 6.3% increase in deposits, a 3% drop in borrowings and a 7.7% increase in capital. With loan balances growing faster than assets, the loan-to-asset ratio ended 2017 at 70.4%, up from 67.5% a year earlier. The fast loan growth also helped loan delinquency rates fall to 0.79% in December, down from 0.83% a year earlier, according to CUNA Mutual. The FDIC’s Quarterly Banking Profile showed loans at the nation’s 5,670 community banks ...

Read Complete Article HERE>»

First-responder Credit Union Newsroom

Search This Blog