Industry’s mainstay—used auto lending—continues to struggle

 

Vehicle Loans

Credit union used-auto loan balances fell at a very low -3.9% seasonally-adjusted annualized growth rate in September, the slowest pace on record due to high auto loan interest rates, high used car prices, little pent-up demand for used cars, more new-car inventory and the accelerating amortization of the massive amount of loans originated in 2022.

Used car prices rose dramatically over the last couple of years due to a shortage in new car production. But as new car production has ramped up recently, used-car prices have fallen 18% from their record high in February 2022 but are still 28% above pre-COVID 19 prices set back in 2019. Credit union new-auto loan balances fell at an 8.3% seasonally-adjusted annualized growth rate in September, the slowest pace since the spring of 2011 due to competitive financing offers from competitors. On a monthly basis, credit union new-auto loan balances fell 0.4% in September, worse than the 0.1% decline reported in September 2023. New-auto loan balances fell 5.6% during the last 12 months while used auto loan balances fell 1.2%.

Vehicle sales rose to a 15.8 million unit seasonally-adjusted annualized sales rate in September, a 3.5% increase from the prior month but still below the 16.5 million normal pace. New vehicle sales are up only 0.5% on a year-ago basis due to high interest rates, and tighter credit standards among lenders. Expect auto sales to pick up during the next few months as interest rates fall and worries over future tariffs incentivizes car buyers to purchase sooner rather than later, the report states.