Last month, I had a conversation with a credit union client where she expressed relief that 2024 was finally coming to an end. Truly, it’s been a tumultuous year for many financial sectors. While NCUA Q2 Quarterly Data Summary showed an increase in total assets, loans outstanding climbed and delinquency rates were up 21 basis points from 2023. Specific to auto loans, new files declined 4.3 percent and delinquency rates of existing loans increased 16 basis points. Experian put a finer point on the situation in their State of the Automotive Finance Market report stating that credit unions lost their lead in used car lending in the first quarter to banks, and credit unions’ share of new car financing also dwindled, falling further behind banks and captive lenders.
But 2025 is here, and there is good news on the horizon. Projections of improved personal economics have boosted consumer confidence, according to the University of Michigan Consumer Sentiment index. And a strong labor market combined with continued declines in inflation supports those positive vibes.
For credit unions, there is a tremendous amount of upside for 2025 in the auto lending segment. As dealer inventory stabilizes and OEMs offer more incentives, the path to purchasing a vehicle will continue to ease. Penetration for credit unions has dropped to nearly 15 percent, so simply bolstering the percentage of automotive loans you close will generate more revenue for the credit union.
Credit unions that emphasize direct loans are able to offer more value to their members and more revenue for all involved. If you have better interest rates than banks or captive lenders, highlight the potential savings to members to generate more interest and opportunity in 2025.
Debt-relief protection products such as WALKAWAY can also ease buyers’ concerns about the economy. Attaching these profitable protection products also generates more revenue for the lender while keeping that vehicle in top form for the member.
For those credit unions who work with dealerships on indirect auto lending, 2025 brings more opportunities to strengthen those relationships to generate more revenue for both parties. Chances are that 40 percent of the auto loan portfolio is generated by three to four dealerships. Build stronger partnerships with those dealerships through simple steps such as quarterly alignment meetings, or programs that generate more opportunities for return visits such as a free oil change. Have frank discussions about practices that can increase the overall percentage of revenue per vehicle sold. And partner on opportunities that target specific credit union member demographics that can help differentiate the dealership.
While 2025 may offer more opportunities to generate lending revenue, there are other benefits the new year can bring. Encourage your team members to make more time with friends and family. Make more time for personal improvement. And make more of an impact in your communities.
As we look at the new year, we want to thank you for the trust you place in us. For almost 50 years, you have depended on EFG to help achieve your profitability goals and we are honored by the opportunity. At EFG Companies, we’re more than an F&I provider, we’re your business partner in auto lending. Together, let’s make more in 2025.