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Business Growth

Mid-Year Auto Lending Review Shows Promise and Opportunity

Financial institutions reporting their mid-year results revealed some areas of promise for a positive year, as well as some areas for improvement.  Auto loan originations and balances were up at several banks, reflecting a rise in car purchases post-pandemic shutdown. Ally, Chase and Wells Fargo originated $58.1 billion in auto loans in the second quarter, up 23.1% from 2020’s second quarter and up 8.3% from the first quarter. Auto balances at Bank of America, Chase and Wells Fargo were $165.8 billion as of June 30, up 5.2% from a year earlier and 1.7% from March 31.

Among credit unions, CUNA estimated that total car loans stood at $392.8 billion on May 30, up 3.9% from a year earlier and up 1.4% from March 31. While this level of performance is likely on the high end, it does indicate strength in the auto finance market.  

Plan for the best, prepare for the worst

The positive gains experienced by credit unions in the auto loan space may well continue through the remainder of the year, as the economy continues to expand and people return to work. Consumer balance sheets remain healthy due to increased savings, low interest rates and government stimulus money, increasing their ability to borrow and pay for a vehicle. But prices for both new and used vehicles have risen exponentially and inventories remain tight. Outbreaks in COVID-19 coupled with the decline in consumer sentiment could prove a mixed bag for credit unions.

Categories
Business Growth

Member-First Thinking Secures More Loans

How would you describe these first few months of 2021? According to CUNA’s Monthly Credit Union Estimates, credit union loan growth continued to slow in January, including further erosion in new car lending. Total car loans nearly flattened at $381.7 billion, just 0.2 percent greater than a year earlier. New auto loans fell 5.8 percent to $140.3 billion, while used auto loans rose 4.1 percent to $241.4 billion. Though captives have gained shares in used cars, both banks and credit unions have been losing shares to captive lenders in the new car loan market.

However, there are positive signals on the horizon that bode well for auto lenders. Vaccine distribution is rolling out and COVID-19 cases are trending down across much of the country. A third stimulus package will deliver checks to millions of low-to-middle income Americans and income tax refunds should start rolling out in coming months.  With consumer confidence trending upward and unemployment numbers dropping, pent-up consumer demand for vehicles could drive customers to the dealership. However, much has changed for many consumers and their credit position. Auto lenders – especially credit unions – have an opportunity to boost their loan portfolio if they stick to one tried-and-true tactic. Always: put the member first.

Categories
Business Growth

What’s Your Value Proposition for 2018?

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

When you walk into a dealership, what value do you bring to the F&I office besides another loan for which their customers may qualify? In 2018, F&I managers across the country are concerned with three hot buttons:

  • Maintaining compliance
  • Maximizing profitability
  • Shortening transaction time

With a myriad of compliance procedures and paperwork on hand, F&I managers have a difficult job when it comes to balancing compliance, profitability and time management. The best way to separate your loan from the competition is to help them with this balance. How do you do this?

Provide clear standards for loan approvals. This not only helps with compliance, but helps F&I managers ensure that they submit well-qualified customers for your loans. You know your qualifications, but how well do F&I managers know them? Look at how often you deny auto loans. If that number is high, it could be because your standards are unclear to the F&I officer.