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.
Lower Interest Rates Support Market Share Gains
As new vehicle prices continue to increase and inflation rates remain high, consumers are seeking financing options that reduce their monthly payments. This is evident in credit union market share growth in both the new and used vehicle segments. While credit unions typically focus on the used car space, the current gain in new vehicle market share is proof that consumers are looking for the best deal regardless of whether they are shopping new or used.
According to Experian, credit unions offered an average new loan rate of 3.72 percent and average used loan rate of 5.24 percent. Meanwhile, captives had higher rates, coming in at 4.18 percent for an average new loan rate and 8.18 percent for an average used loan rate.
The average monthly payment for a used vehicle went from $440 in Q2 2021 to $515 in Q2 2022 – compared to the average monthly payment for a new vehicle, which hit a record high of $667 last quarter, up from $582 the previous year. Credit union lenders should make note of these payment-conscious consumers and structure their deals accordingly.
However, a monthly payment becomes more challenging when coupled with expensive repair bills. Cost-conscious consumers who forego consumer protection products when financing their vehicle may be short-sighted. Credit union lenders can structure protection packages that meet buyers’ budget thresholds while supporting the long-term value of the vehicle. Educating consumers – especially first-time buyers – is another strength that will help credit unions maintain marketshare.
Members First
There are many economic factors at play for the remainder of the year. Continued strength in hiring, declining inflation rates, stabilizing housing prices all play a role in consumer’s overall confidence when making a vehicle purchase in 2022. Credit union lenders would be well served by promoting their member-first focus, with continued flexibility in creating deals that keep monthly payments low while protecting the value of the vehicle, as well as offering debt-protection products such as WALKAWAY®.
At EFG Companies, our team of F&I experts are here to advise and assist our lending partners. We’re not just a provider, we’re a business partner.