It might be time to take a deep breath. There has been a tremendous amount of swirl lately in the economic and political headlines, but I’d like to put a little perspective on today’s business environment and encourage our credit union clients to optimistically plan for the second half of 2024.
Regardless of who we elect as our president, history shows that U.S. presidential elections have had little bearing on the trajectory of the economy and business, regardless of which party wins. Through all 46 presidencies to date, the U.S. economy has continued to grow. While there are some underlying economic macro trends, we agree with most experts supporting a continued decrease in inflation and interest rates, and projections reflecting a strong economy. In fact, The Conference Board recently issued its forecast predicting that GDP growth should pick up later in 2024 as inflation subsides and the Fed first signals and then actually cuts interest rates.
While The Conference Board did reveal that consumer spending decelerated in the first half of the year, prompting GDP to dip, the impact was softened by a continued strong labor market and strength in the stock market. As long as consumers believe their jobs are safe and they can make regular monthly payments easily, they will continue to spend and borrow throughout the remainder of the year.
Our recommendation for the remainder of the year is to control the things you can and continue to strengthen the member-focused approach that drives value and sets credit unions apart from other lending institutions. At EFG, we have weathered 11 presidential elections, 22 Congressional elections, and countless state and local contests, not to mention the Great Recession. Just like you, we have a proven history of enabling our clients to achieve their goals. So, let’s look at some specific actions to take in the second half of the year.
Opportunities exist for growth
While credit unions have experienced a persistent decline in auto lending versus banks and captives, numerous opportunities exist for lenders seeking to grow their portfolios. Look for options to differentiate, tap into alternative ways to establish creditworthiness, and utilize consumer protection products as protection from default risk.
Credit unions are historically more member-focused. Take advantage of that perception and work more closely with diverse populations, offer more attractive loan terms, and take strategic risks on emerging opportunities such as EVs and leasing.
Loan defaults are rising as pandemic funding declines and companies apply belt-tightening measures to overcome reduced consumer spending. Protection products such as WALKAWAY® provide a unique value-selling opportunity and protect the overall health of the loan portfolio.
These actions are not revolutionary, but they may prompt you to focus more specifically on the changes you can implement within your auto loan department. Remember, our proven team of EFG experts bring years of experience to your team and are here to help. At EFG Companies, we’re more than a consumer protection product provider, we’re your business partner and can be a valued resource to your credit union. Contact us today to learn more about how our team can help you achieve your auto loan portfolio goals.