Credit Union Car Loan Production Improved in Last Months of 2019

Credit unions improved their automotive loan production from the third quarter to the fourth quarter last year in comparison with banks and the financing arms of manufacturers, according to an Experian report released Wednesday.

Experian’s Q4 2019 State of the Automotive Finance Market Report shows credit unions originated 19.9% of all U.S. car loans and leases in the three months ending Dec. 31, up from a 19.5% share in 2019′s third quarter but down from a 21.3% share in the final three months of 2018.

Market shares moved in the opposite direction for banks. They generated 32.7% of loans and leases in the fourth quarter. Their share fell from 35.9% in 2019′s third quarter, but rose from 30.7% in 2018′s fourth quarter.

Captives, the lending arms of manufacturers, generated 29.8% of loans and leases in the fourth quarter, down from 34.8% in 2019′s third quarter and 30.6% in 2018′s fourth quarter.

The remaining 17.6% of loans and leases originated in the fourth quarter came from finance companies and buy-here-pay-here lenders. Their share was up from 9.8% in last year’s third quarter and 17.3% in 2018′s fourth quarter.

The Irish information services company’s report showed little change in the risk distribution or credit quality of auto loans.

The 60-day delinquency rate for loan balances was 0.25% at credit unions as of Dec. 31, down 1 basis point. At banks, the rate fell 3 basis points to 0.67, and among all lenders it was unchanged at 0.78%.

The lowest rates 60-day delinquency rates among all lenders were in the Pacific Northwest: Oregon (0.36%), Idaho (0.40%) and Washington (0.41%). The highest rates were in the South: Mississippi (1.54%), Louisiana (1.26%), Georgia (1.14%), South Carolina (1.05%) and Alabama (1.01%).

Meanwhile average credit scores improved. The average new car buyer had a credit score of 719, up from 718 a year ago and 712 in 2015′s fourth quarter. The average used car buyer had a 661 score in last year’s fourth quarter, up from 659 a year earlier and 649 in 2015′s fourth quarter.

Lenders generally shifted slightly toward more prime borrowers.

Prime borrowers, those with credit scores of 661 and up, accounted for 61.4% of loans and leases in the fourth quarter, up from 61.2% a year earlier.

Non-prime borrowers, those with credit scores of 601 to 660, accounted for 19.0% of loans, down from 19.2% a year earlier, while subprime borrowers, those with scores of 600 or lower, accounted for 19.6% of loans, unchanged from a year earlier.

NCUA doesn’t report auto loan originations. The more familiar figure is measuring portfolio values.

By that measure, credit unions held $381.5 billion in automotive loans on Dec. 31, up 2.6% from a year earlier, according to CUNA Mutual Group. Credit unions held 32.0% of the $1.19 trillion in motor vehicle loans held by all lenders Dec. 31, as reported by the Fed, a share that down from 32.3% a year earlier.

Meanwhile, banks increased their share of the auto portfolio from 39.5% at the end of 2018 to 40.5% at the end of 2019. The share for captives, finance companies and all others was 27.5% as of Dec. 31, down from 28.2% a year earlier.