Tag: state of auto finance market

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Business Growth

The Value in Used Leasing

The auto industry is changing – again. If you’re like me, you probably feel whiplash from all the changes that have affected the automotive industry in the last few years. From pandemic shutdowns and parts shortages to sky-high interest rates, automotive lenders have faced the challenge of auto loan portfolios continuously testing the boundaries of risk mitigation.

The Wall Street Journal recently reported that the costs related to car ownership continue to outpace the consumer price index. Aside from insurance, gas, parking, and maintenance, the auto loan itself has reached epic proportion. According to the latest State of the Automotive Finance Market report from Experian, the average amount financed on a new vehicle for 2023 was $40,366 with an average monthly loan payment of $738 with loan terms up to 85+ months.

These costs alone are not sustainable for consumers or lenders. According to Credit Union Leasing of America, over-extension is one of the primary concerns for credit unions in the 2023 auto-finance landscape.

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Categories
Business Growth

There’s Still Opportunity for Gains

The latest report from Experian on the State of Auto Finance Q2 2021 revealed that banks and captives continued to gain auto loan market share while credit unions continued a 3-year trend of losing market share. Combined, banks and captives account for approximately 60 percent of the overall share, while credit unions slipped to 18.21 percent. The health of a consumer’s financial stability is clearly on display as loans ranked prime+ were nearly 62 percent of total loans while total subprime dropped below 20 percent and deep subprime hit record lows.

According to Experian, subprime financing will remain at near-record lows while prime will increase across all transaction types for the remainder of the year. Loan amounts and payments will remain at near-record highs and will likely hit record-highs for used vehicles. Overall outstanding balances will increase, and 60-day delinquencies will decrease.

Opportunity for credit unions

Surprisingly, the U.S. consumer actually became financially stronger during the pandemic, boosting personal savings by nearly 2X of disposable income. This strong balance sheet enables credit unions to focus on maximizing their customer engagement time, with discussions of supporting and maintaining that wealth.

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Categories
Business Growth

New Horizons Ahead in the Used Car Market

Have you paid attention to the used-car market this year? Previously viewed as less desirable by some lenders, used cars are gaining some cachet. Unfortunately, credit unions appear to be missing the boat. According to the recently issued Experian State of the Automotive Finance Market Report for the second quarter of 2020, market share for credit unions in used car financing has declined precipitously since the same time last year. Experian’s report posted a 3.9 percent market share decline to 24.9 percent.

Why the decline? Several factors are likely at play. The market for used cars has grown exponentially. In June, franchised car dealers sold 1.2 million used cars and trucks, according to Edmunds, up 22 percent from 2019. It was the highest monthly total since at least 2007. Credit unions have lower market share with franchised dealers and so are missing the bulk of this sales volume.

New unit inventory issues are also creating a perceived demand for older cars, fed by a roughly two-month halt in production of new cars earlier in 2020. In the first seven months of the year, automakers produced 6.6 million cars and light trucks in North America – three million fewer than in 2019, according to Automotive News. Additionally, consumers are keeping their vehicles for up to 12 years and receiving a tidy sum if they choose to sell, slowing the revolving door of used car inventory.

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