Category: Business Growth

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Business Growth

Choices Matter

Everyone likes choices, and consumers looking to secure financing for a vehicle are no different. When shopping for the best auto loan, they look at rates, but that’s not all. They’re also looking for value-added options to provide greater security in their decision, especially in today’s turbulent economic times.

So, how are credit unions faring?

According to S&P Global Intelligence, U.S. credit unions grew their auto loan portfolios by more than $6 billion in the fourth quarter of 2021, reporting a total balance of $408.21 billion at the end of the period. Breaking that down, new auto loans at credit unions amounted to $143.20 billion at year-end 2021, up from $142.86 billion at the end of the previous quarter. Used car loans increased 2.2 percent quarter-over-quarter and 10.2 percent year-over-year to $265.01 billion.

Auto loan trends callout

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Business Growth

There’s Still Opportunity for Gains

The latest report from Experian on the State of Auto Finance Q2 2021 revealed that banks and captives continued to gain auto loan market share while credit unions continued a 3-year trend of losing market share. Combined, banks and captives account for approximately 60 percent of the overall share, while credit unions slipped to 18.21 percent. The health of a consumer’s financial stability is clearly on display as loans ranked prime+ were nearly 62 percent of total loans while total subprime dropped below 20 percent and deep subprime hit record lows.

According to Experian, subprime financing will remain at near-record lows while prime will increase across all transaction types for the remainder of the year. Loan amounts and payments will remain at near-record highs and will likely hit record-highs for used vehicles. Overall outstanding balances will increase, and 60-day delinquencies will decrease.

Opportunity for credit unions

Surprisingly, the U.S. consumer actually became financially stronger during the pandemic, boosting personal savings by nearly 2X of disposable income. This strong balance sheet enables credit unions to focus on maximizing their customer engagement time, with discussions of supporting and maintaining that wealth.

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Business Growth

Being Risk-Averse Doesn’t Work

Lenders learn early in their careers that taking a conservative, risk-averse lending position is the best strategy to maintaining a grade A rating and a healthy balance sheet. According to a recent research brief issued by TransUnion and the Filene Research Institute, credit unions are leaning too far on the conservative spectrum of lending, resulting in missed opportunities and undermining their long-standing reputation as the lenders who are best able to help the communities they serve.

The analysis reveals that many credit unions have extremely low delinquency and charge-off rates, signaling that their current lending approach no longer aligns with the true nature of a credit union – to be accessible to all people, regardless of credit profile. Through interviews, qualitative and quantitative data, many credit unions reported to TransUnion that they were losing valuable business for the sake of maintaining an unrealistic number for delinquencies and charge-offs.

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