Credit unions have an extra reason to celebrate over the holiday and new year season. According to the third quarter State of Automotive Finance Market Report from Experian, credit unions now account for the majority of the auto loan market share. Whether they keep these gains in 2023 is yet to be seen. While Federal Reserve prime rate increases do not directly translate to increases in auto loan rates, there are some notable ripple effects that auto lenders are watching. Fluctuations in new and used car prices, higher down payments, longer loan terms, increased defaults, and loan-to-value ratios will all factor into the mix next year. We look forward to collaborating with our credit union lending partners and keeping the scales on an even keel.
GAP for some
Keeping a close eye on the loan-to-value ratio on every deal will be key for lenders in 2023. We encourage our lending partners to offer GAP on those deals with lower down payments and a higher risk of default if the vehicle is deemed undriveable and insurance coverage does not cover the replacement value. For some customers, having GAP coverage in addition to a vehicle service contract can mean the difference between a major tip of the scale or a manageable event.
Reaching the limit
Higher monthly payments and longer payment terms are becoming more common place as the price of both new and used vehicles continue to rise. While some buyers might focus only on the short term, auto lenders who look across their total portfolio might see signs of caution. Even credit union members who are considered prime can run into difficulty in uncertain economic times. Debt protection products such as WALKAWAY® can provide some counterweights to keep the scale in balance and protect positive revenue in 2023.