Categories
Economy

Opportunity for Credit Unions Ahead?

It can be challenging to think strategically when each day brings a new challenge, a new directive, a new mandate, or a new situation impacting your business and the community. The second quarter was a tale of two cities for credit unions. April reflected a precipitous drop in most aspects of the automotive and financial markets, thanks to shelter-in-place mandates and the pandemic sweeping across the country. But May and June told a slightly different – and somewhat better – story. Light vehicle sales were only down 24 percent in June as compared to 2019, year over year. While in a normal year, dealers and lenders would decry that number, this year there was a round of huzzahs! That’s just the world we live in these days.

Credit unions started the year on an upward trend for automotive lending. Average loan amounts continue to increase according to the latest Experian State of Auto Finance Report. In the first quarter, new vehicle loan amounts averaged $33,739, and used vehicle loans totaled $20,723 on average. Buyers also increased vehicle payments, with the average new vehicle payment jumping to $569.

After leveling off through much of May and June, financing rates dropped to their lowest level of the year for the week of July 15 to 4.24 percent, a decrease of 0.09 percent from the week prior. Rates held steady for the week of July 22, but were down 0.36 percent since the beginning of the year and down 0.49 percent from 2019 numbers.

Categories
Business Growth Economy

In A Position of Strength

Looking for a ray of sunshine these days? Consider this…credit unions are in a much stronger financial position to weather the COVID-19 pandemic and the looming economic fall-out versus the Great Recession of 2007-2009. According to the quarterly Trendwatch report from Callahan & Associates, as of March 31, assets held in the United States stood at $1,663.3 billion and capital registered at $193.4 billion – double those respective positions on Dec. 31, 2007. Member relationships were also stronger than those recorded in 2007, proving that at least some lessons were learned from that recession event.

There were also some bright spots in Q1 2020 metrics. Credit unions notched the largest ever quarterly net liquidity increase in Q1 2020 to $50 billion, providing lots of flexibility for strategic moves. This liquidity enabled credit unions to extend an additional $5 billion in credit card lines in the first quarter compared to the fourth quarter of 2019.

Buoyed by consumer confidence early in the first quarter, first time mortgages accounted for over a third of the quarter’s originations. Fixed rate mortgages more than doubled from Q1 2019 to Q1 2020, reflecting historically low interest rates. But a cloud did darken overall loan growth by 1.2 percent for the 12 months ending March 31, 2020 compared to the 12 months ending March 31, 2019.

Categories
Business Growth Economy

What to Expect in 2020

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

As financial institutions and dealers close the books on 2019, it’s worth reflecting on a few data points that will prove useful in 2020. The Experian State of the Automotive Finance Q3 2019 Report reflected these key findings:

  • Delinquency trends remained stable at 2.25% for 30-day delinquencies and 0.75% for 60-day delinquencies
  • Banks and captives show increases in market share, while credit unions decline
  • Credit scores continue to increase for new financing with average credit score reaching 725
  • Used prime financing reach highest point since 2009
  • Total market remains stable with modest year-over-year change
  • Loan amounts set yet another record high
  • Longer term loans continue to dominate the market
  • Rates continue to increase across all risk segments

Couple these points with the increasing cost of new vehicles, a tight market for used vehicles and strong end-of-year sales numbers and you have a good outlook for the 2020 auto finance market. So, what’s a credit union or local bank to do to increase market share in a climate of rising vehicle prices, monthly payments and loan terms?