I drove down ‘dealership row’ last weekend and was struck by the number of massive SALE banners and vehicle promotions. It’s that time of year when dealers are trying to move 2024 inventory to make room for the 2025 models. Fortunately, this year, they have some inventory to move – but face some stiff challenges thanks to high vehicle prices, stubborn interest rates, and hesitant consumers.
Industry forecasters expect third-quarter U.S. vehicle sales to be roughly flat compared to a year earlier. According to Edmunds’s estimate, automakers sold about 3.9 million new vehicles in the U.S. in the July-September period, 2.3% less than a year ago. Cox also forecasts a 2.1% decline, while J.D. Power predicts flat sales. The sluggish results would put automakers on pace to finish the year with U.S. vehicle sales of around 15.7 million—a slight increase from last year, when supply-chain snags were still hampering vehicle output but still off historic highs.
Many analysts and dealers point to affordability as the primary reason sales haven’t marched back to those levels. According to J.D. Power, the average new vehicle in the U.S. sold for $44,467 in September, down nearly 3% from last year as automakers and dealers offer more discounts.
While the Federal Reserve cut the U.S. benchmark interest rate in September and signaled additional cuts before the end of the year, that reduction has not translated into significantly lower borrowing costs for car shoppers. According to J.D. Power, new car finance payments averaged $734 last month, up slightly from last year.
For many consumers, affordability continues to be an issue. Buyers who have not set foot on a dealer lot in several years – and might be wooed by the massive SALE banners – are in for a shock. According to a Wards Intelligence white paper, car buyers have dramatically shifted their approach to car buying, preferring primarily online shopping experiences. Unfortunately, there is a wide disparity in the level of vehicle and financing information provided, leading to the risk of confusion and a failed sale.
For credit unions, this confluence of challenges is the sweet spot of boosting the auto loan portfolio while recapturing market share from banks and captives. Credit unions offer numerous benefits to help consumers across the car-buying finishing line. Now is the time to ensure your credit union is firing on all cylinders to capture every deal.
Ready…set…loan
As consumers stretch their wallets, more are turning to leasing to walk away from the dealership with less money out of pocket. According to Cox, leases accounted for 25% of new car sales in the third quarter, up from 20% a year earlier. Credit unions are in a prime position to offer more attractive financing versus banks and captives, a fact that could easily seal the deal for customers re-entering the vehicle marketplace.
Credit unions also have the benefit of giving their customers more personalized loan and F&I options versus what might be available at the dealership. In addition to being more competitive on the APR, credit unions can offer a customized suite of complimentary protection products on new, pre-owned or even refinanced loans.
The automotive finance market remains dynamic, and it’s inevitable that consumer behaviors will shift based on where the market stands and who is offering the best option for flexibility and affordability. By analyzing key data points, credit unions can stay ahead of the trends and prepare for what’s to come – particularly in the used vehicle space.
With over 50 years of experience, we’re more than an F&I 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 compliance goals.