Members needing money for cars and businesses fueled lending in November among the nation's 5,806 credit unions, but CUNA Mutual Group predicted car lending will slow this year.
Home equity lines of credit and other second liens showed the weakest growth in November, while credit card growth lagged slightly, according to the Credit Union Trends Report from CUNA Mutual Group.
New car loans expanded faster than those for used cars from October to November, resulting in a 1% overall gain that matched last year's one-month gain. Credit unions ended November with $338.5 billion in new and used car loans, up 12.7% from a year ago and increasing its share 63 basis points to nearly 35% of total loans.
The growth in auto loans has been fed by the increasing number of credit unions pursuing dealer agreements for indirect lending. However, many credit union executives said the loans from indirect lending carry low margins and the new members' connection to their credit unions are tenuous.
CUNA Mutual economist Steven Rick said overall growth in credit union auto loans will be limited by lower new car sales. Sales peaked at 17.5 million cars and light trucks in 2016, but fell to about 17.3 million last year, the first annual decline since 2009.
"Expect auto sales to slow to 17 million units in 2018 as pent up demand fades away," Rick said.
Auto loans have slowed at Golden 1 Credit Union, Sacramento, Calif. ($11.3 billion in assets, 902,074 members), but speed is relative, said Greg Brown, chief lending officer for the third largest auto lender among credit unions.
Golden 1′s car loan portfolio stood at $4.4 billion on Sept. 30, up 28% from a year earlier and accounting for 55% of total loans. Other types of loans grew 6% to $3.6 billion.
Despite portfolio growth, auto loan originations fell from a peak of about $2 billion in 2016 to $1.2 billion last year. This year the goal is $1.6 billion, Brown said.
And 28% growth in the auto portfolio in 2017 compared with an average annual growth rate of about 40% from 2011 to 2016.
"For the last five years we have had an artificially low interest rate environment. It's good times; everybody can afford more things," he said. "Things start to turn around, the economy gets better. Now interest rates are going up. We're going back to a normal economic environment."
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