As long as unemployment remains high, a robust recovery of vehicle sales may not be seen anytime soon.
That's according to NAFCU's Macro Data Flash report. Vehicle sales experienced a mild rebound in July, although the current sales rate still falls short of the pace from earlier in the year. Total vehicle sales in July increased from 11.5 million annualized units in June to 12.2 million annualized units, the data showed.
Over the past 12 months, sales were up by 5.5%. NAFCU said manufacturers continue to resist offering sales incentives, which are down 15% from a year ago.
"Buyers remain determined to wait out the supply disruptions until incentives reappear," according to NAFCU. "Vehicle sales are expected to pick up modestly during the remainder of the year, but a robust recovery will not occur as long as unemployment and low income growth persist."
Meanwhile, July's increase in sales isn't reflected in the credit union industry's loan originations, said Brian Turner, director of advisory services at Southwest Corporate Investment Services, a wholly owned CUSO of Southwest Bridge Corporate Federal Credit Union.
CUNA estimates that vehicle loans outstanding are down 0.8% through the first half of the year with a 9.9% decline in new vehicle loans offset by a 4.8% increase in used vehicle loans, Turner noted. Vehicle loans were down close to 5.5% in 2010.
Turner said since the end of 2006, the allocation of vehicle loans has declined from 35.4% of total loans to 28.8%. Citing a recent rate survey, he added that average credit union financing rate for a 60-month vehicle loan nationwide was 3.85% compared with 4.68% a year ago and 5.35% in July 2009.
"Consumers and their spending behavior remain fragile amidst high unemployment, falling home values and now an unsteady stock market," Turner said. "Certainly a low rate environment has not been enticing enough for consumers to open their wallets even though auto financing rates have reached their lowest level in some time."
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