credit union automotive lending

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.

Lenders learn early in their careers that taking a conservative, risk-averse lending position is the best strategy to maintaining a grade A rating and a healthy balance sheet. According to a recent research brief issued by TransUnion and the Filene Research Institute, credit unions are leaning too far on the conservative spectrum of lending, resulting in missed opportunities and undermining their long-standing reputation as the lenders who are best able to help the communities they serve.

The analysis reveals that many credit unions have extremely low delinquency and charge-off rates, signaling that their current lending approach no longer aligns with the true nature of a credit union – to be accessible to all people, regardless of credit profile. Through interviews, qualitative and quantitative data, many credit unions reported to TransUnion that they were losing valuable business for the sake of maintaining an unrealistic number for delinquencies and charge-offs.