Strength in Numbers: Credit Unions Continue to Make Their Mark in the Auto Lending Arena
Credit unions continue to show their strength in the auto lending marketplace in 2016. With new car sales up 3%, 2016 is looking much like 2015 — a record year for the auto industry (with 17.5 million new vehicles sold) — with about 17.7 million projected new auto sales units by years end. Credit unions continue to capitalize on banner vehicle sales over the last year 18 months — to grow auto loans and further strengthen their marketplace presence.
During CU Direct’s recent quarterly State of the Credit Union Auto Lending Market webcast, we took a closer look at credit union performance in the auto lending arena, and how Indirect Lending continues to be a key driving factor in credit unions growing their auto loan portfolios.
The Case for Credit Unions
Auto loans comprise one-third of credit unions’ portfolios, and are the fastest-growing loan segment. At the same time, the Indirect Lending channel is the largest source of that growth. Over the last 5 years, credit unions have almost doubled their Indirect Lending, from $70 billion in 2010 to $137 billion in 2015, growing at a 14.4% compound annual growth rate. Increasingly, credit unions are realizing the necessity to be active and more engaged in Indirect Lending or they risk losing loans.
Credit unions continue to narrow the gap with both captives and banks, capturing 1 of 4 auto loan originations in the market: $154 billion of the $620 billion in auto originations in 2015, a 20% year-over-year increase from 2014. In 2015, auto loans made up 33% of total outstanding balances for credit unions, up from 32% in 2014.
Moreover, even as major players such as Ford Motor Credit, Toyota Financial and Capitol One reported market declines of 18.6%, 7.6%, and 3.1% respectively from March 2015, credit unions continue to see strong growth.
Credit unions as a whole have grown market share in 2016 (through April) to 21%, up from 20% in April 2015, and for the second year in a row taking share away from banks and captives to become the #2 lender type. Banks have experienced a decrease in market share since 2011, falling from 40.6% market share to 36% in 2016. Similarly, captives have seen their share of the auto lending pie decrease, going from 19.9% market share in 2013 to 16.8% share YTD in 2016.
As a further testament to credit unions’ ongoing rise in the auto lending marketplace, the 1,000+ credit unions on CU Direct’s CUDL Lending Platform, as an aggregate, are leading market place growth in 2016, with 16% year-over-year growth to date, and generating over 252,000 auto loans through the first quarter. CU Direct’s credit unions continue to have a very strong presence in the marketplace as the #3 auto lender in the U.S. (climbing from the nation’s 7th ranked lender in 2010), outperforming major marketplace players, including Chase Auto Finance, while trailing only Wells Fargo (#1) and Ally (#2).
Indirect Lending’s Increasing Value
The Indirect channel continues to play a vital role in helping credit unions not only grow auto loans, but also in acquiring new members. Through April of this year, 61% of auto loans through the CUDL System were to new members joining at the dealership, with 39% of loans going to existing members. New members financed 65.3% used vehicles vs. 31.3% new vehicles (3.4% other), while existing members financed 55.7% used vs. 27% new vehicles, with 17% financing other.
On a national level, the Indirect Auto Lending channel has helped CU membership grow to include 104 million members, with more than 1 in 4 members now having an auto loan.
At the fourth quarter mark of 2015, credit unions saw total auto loan balances increase to $264.5 billion from $232 billion during the same period in 2014. Yet, despite tremendous loan growth, credit unions continue to post the marketplace’s lowest delinquency and charge-off rates. As of the fourth quarter 2015, only 0.37% of CU auto loans were 60-days delinquent, (flat vs. 0.37% in Q4 of 2014), whereas banks and captives posted 0.62% and 0.51% rates respectively during the same time frame.
Auto lending continues to be a bellwether for credit unions as the fastest growing loan type. Credit unions are not only competing in the auto lending arena, they’re outperforming much of the marketplace, growing their market presence, capturing more loans, and driving membership through the Indirect channel.