Category: Economy

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Business Growth Economy

Maintaining Market Share Gains

Credit union auto lenders received an early holiday gift in the form of Experian’s State of the Automotive Finance Market Report: Q2 2022. According to the quarterly report, credit unions’ auto lending market share increased to 25.81 percent, from 18.32 percent in Q2 2021. In comparison, captives decreased to 22.64 percent this quarter, from 28.47 percent the previous year. This was the highest increase of total market share credit unions have ever experienced. Whoop!

What prompted this exceptional gain? While captive lenders beat a hasty retreat from incentives, credit unions stayed flexible, offering lower interest rates to consumers seeking the best auto financing deal they could find. In Q2 2022, credit unions’ new vehicle market share increased to 26.69 percent, from 15.27 percent in Q2 2021, and grew used market share from 23.49 percent to 28.62 percent year-over-year.

Is this positive trend an anomaly – or do credit unions have the potential continue this growth into 2023? The answer depends on whether credit unions continue those practices which separate them from the competition as well as responding quickly to shifting consumer needs during these uncertain times.

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Business Growth Compliance Economy

Will New Rules Hamper Growth?

Credit unions have notched the highest percentage of auto loan originations since 2007. Leveraging consumer inflationary concerns and lower interest rates, Experian’s “State of the Automotive Finance Market” report for the second quarter released Aug. 25 showed credit unions produced 25.8 percent of the loans and leases from lenders in the three months ending June 30, up from 18.3 percent a year earlier and 22.1 percent in this year’s first quarter. Pop the corks and let the confetti fly!

Inflation concerns are likely to remain for the rest of 2022. The Federal Reserve signaled earlier this month that it plans to continue its aggressive approach to raising interest rates, with a target of 4.0 percent. However, declining gas prices across the country prompted a notable increase in the Consumer Confidence Index for August. Purchasing intent and vacation intent also increased, indicating that monetary concerns have not made a noticeable impact on consumer behavior.

In fact, consumers have made overall improvements in their financial health since the pandemic. Experian’s Melinda Zabritski, Senior Director of Automotive Financial Solutions, has seen continued improvement in consumer credit scores over the last several years with a greater percentage falling in the prime category.

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Economy

The Fed’s Impact on Auto Lending

2022 has kicked off with some very mixed signals. While corporate earnings and retail auto sales closed out the 2021 fiscal year with strong numbers, the stock market has been on a roller coaster ride, and labor and supply chain issues continue to stifle growth. Adding to the confounding picture is the rate of inflation. At its current rate – 7.04 percent – most economists and investors do not expect inflation to return to anything like the double-digit levels that prevailed in the early 1980s. However, the rate of inflation and the contributing indices will still have an impact on auto lending in 2022.

Let’s look a little deeper into the details. The U.S. economy grew 1.7 percent in the fourth quarter, a 6.9 percent annual rate and its largest one-year jump since 1984. While impressive, the expansion reflects the depth of the damage inflicted by the pandemic in 2020/2021.

From a consumer standpoint, the rate of inflation is reflected in both the consumer price index and the personal consumption expenditure index — each climbed to a 39-year high last year. The cost of goods and consumers’ consumption of those goods has a direct correlation with inflation and purchasing power. To put it simply, you would have to spend 7.04 percent more money in 2022 than in 2021 for the same item.

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