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Mark Rappaport President Simplicity Division EFG Companies

Contributing Author:
Mark Rappaport
Simplicity Division
EFG Companies

You’re sitting in a dark movie theater, watching a suspenseful film. Tensions build as an ominous drumbeat signals danger. Is the danger real or a figment of your imagination?

The credit union industry might be hearing a drumbeat, but is it real?

After steadily gaining auto finance share over the past eight years, credit unions lost market share in the first quarter, according to Experian’s latest State of the Automotive Finance Market Report. Market share for credit unions dipped 1.4 percentage points to 19.9%, down from 21.3% in the first quarter of 2018.

The drop was largely driven by declines in used-car financing, where market share fell to 26% from 28% in first-quarter 2018. Even in new-vehicle financing, credit unions’ share dipped to 12.4% from 13.5% the previous year.

Cause for worry? Industry pundits brushed off the concern by saying that credit unions had scaled back auto loan originations in the first quarter because they had begun to exceed their lending capacity. Having gained market share since 2011, the appetite for auto loans had peaked in the fourth quarter of 2018. So credit unions pushed away from the table, saying “we’re full.”

Whether this scenario is correct or merely a characterization remains to be seen in the second half of this year. One thing we know is true. New auto sales are expected to decline at least 1% year-over-year through 2020. Any drop in market share for either new or used vehicle loans could have double the effect in a given auto loan portfolio.

Calling Out the Calvary

So, what steps can a credit union take to lessen the tension of a market that could easily swing up or down? It’s never too early to call for reinforcements and gird the borders from a declining market and increased competition. Banks and captives have increased their appetite for both new and used vehicle loans this year, targeting more subprime consumers and extending the length of their loans. Specifically, banks increased used-vehicle market share 1.7 percentage points to 36.3%, according to Experian; and, the loan length reached nearly 80 months.

Now is the time to fight back. But rather than swinging wildly, be strategic in mounting your defense. Work with your dealers so that you can stay competitive on every deal. In this market climate, each deal should be considered. Look for hidden opportunities and work with the dealership to ask the right questions.

Maximize profit on every vehicle sold. Consumer protection products truly put more money into every deal, from the sale price to the sustainability of the loan. And, with the rising price of vehicles these days, customers should be interested in maximizing their value and protecting their investment.

With more than 40 years of experience in the retail automotive space, EFG Companies knows how to navigate clients through uncertain times to generate long-term success. Contact us today to see what we can do for you.

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