A mid-year review for credit unions reveals several opportunities to gain auto lending market share versus banks and captive lenders. Leveraging their traditional position offering competitive rates and personalized service, auto loan portfolio managers should focus on aggressive pricing and strong member-focused strategies to make significant gains in vehicle financing market share.
At the end of July, the Federal Reserve voted to hold its benchmark interest rate steady for the fifth time this year, keeping it in the range of 4.25% to 4.50%. For auto retailers, the Fed’s holding pattern means no immediate relief from borrowing costs. The cost of on-lot inventory and cash reserves to purchase new year models remains high. Dealerships who focus strengthening partner relationships with preferred lenders will have greater success moving that inventory.
Strategic Pricing Benefits Dealers, Consumers and Credit Unions
The Conference Board Consumer Confidence Index® improved by 2 points in July as American households ended the month feeling slightly more upbeat than the previous month. Concerns about inflation ticked down a half point and fears surrounding tariff impacts were paused slightly.
Auto loan rates are slowly easing. According to Experian, the average new car loan rate dropped to 9.06% in July, down 27 basis points (bps) from June. The news is even better for top-tier credit (760+), rates are as low as 5.4%, the lowest since Sept. 2022. And for those with prime credit rates, many are capturing a 0% APR loan.
Historically flexible credit unions should take this data as an open opportunity invitation. Known for offering the best auto loan rates, credit unions who proactively engage dealer partners, refresh lending parameters and aggressively work to get buyers in vehicles will accomplish two goals. They will increase their auto-loan market share while helping dealer partners move units.
Members are thirsty for more information to help them make an informed buying decision. Education – credit unions’ cornerstone value proposition – is the key opportunity. Rather than focusing on interest rates, guide buyers to focus on their credit score. A one-tier improvement in credit score (~100 points) can unlock better loan terms than any potential rate cut from the Fed.
Strategic loan pricing across different credit tiers helps credit unions navigate the gray area between sensitivity to price and profitability. Education on different purchasing scenarios such as used versus new, lease versus purchase helps the buyer feel confident to finalize the purchase. Dealers also have more flexibility to offer options.
Advocacy Drives Opportunities for Consumers and Lending Team
As economic concerns continue to be top of mind for consumers, members who are purchasing a vehicle could use an advocate in their corner ready to inform and educate them. A frank, honest discussion with a well-trained lending team member can mean the difference between a deal – or no deal.
The latest Experian data revealed the average new-vehicle loan amount in July rose to $41,720, up $1,110 from last year. Monthly payments increased slightly from $737 to $745. For used vehicles, the average loan amount climbed just $90, reaching $26,144, with a monthly payment down from $524 to $521. A balanced discussion of credit score, manageable payment amount, and length of loan can equal a profitable loan with limited risk.
Debt protection tools such as WALKAWAY® are great options to safeguard the loan while easing a member’s potential financial concerns. Attaching valuable F&I repair and protection products to the loan will keep that vehicle on the road longer and guard against unexpected repair bills which can be financially devastating for a member.
Seize these opportunities in the second half of the year with the right tools and support to help you grow your auto loan portfolio, capture market share and strengthen relationships with members and dealer partners. At EFG Companies, we’re more than an F&I provider, we’re your trusted business partner in auto lending. Together, let’s make more in 2025.
Connect with author Brien Joyce on LinkedIn, or contact him directly at bjoyce@efgusa.com or 770-843-4025.