As Sales Boom, Credit Unions Only Hold a Sliver of EV Loans

An Experian report showed credit unions have about the same toehold in the rapidly accelerating financing market for electric vehicles as they do for loans and leases on other new vehicles.

Experian’s “State of the Automotive Finance Market” released Thursday showed credit unions generated 13.7% of new car loans and leases of all types in the three months that ended Dec. 31, and 12.1% of electric vehicle financing.

Banks and captives together produced 86% of loans and leases for new electric vehicles and 81% of financing for new vehicles overall. The report did not show any historical trend for the share of electric vehicle financing by lender type.

According to Cox Automotive, there were 460,953 electric vehicles sold last year in the United States, accounting for 3.1% of the new vehicle market. Electric car sales were nearly double the 250,898 cars sold in 2020, when they accounted for 1.7% of the market.

Melinda Zabritski, Experian’s senior director of automotive financial solutions, said electric vehicles are also rapidly growing among loans and leases. Electric vehicles accounted for 4.6% of financing for new vehicles last year, double the share in 2020 and up from 1.3% in 2019.

“The exponential growth in electric vehicle financing shows us just how prominent this fuel type is becoming, bringing additional context to the industry buzz,” Zabritski said. “Understanding the landscape of financing will be helpful for lenders and dealers to understand consumer preferences and make informed decisions as more models continue to be introduced.”

Consumers are shifting from leases to loans as average monthly lease payments rise. About 72% of electric vehicles were financed with a loan last year, up from 68% in 2020 and 66% in 2019.

The average monthly loan payment for an electric vehicle was $774, compared with $629 for a gasoline-powered vehicle. The average electric vehicle loan payment rose from $738 in 2020’s fourth quarter, after falling since at least 2017.

Tesla accounted for 76% of the electric vehicles with leases or loans last year. Ford was a distant second with 6% through its Mustang Mach-E. Volkswagen was third with its ID.4 claiming a 3.4% share.

Beyond electric vehicles, Experian’s report showed that credit unions in the fourth quarter continued the trend shown in the third quarter: Increasing share in a slowing market.

Credit unions’ share of the number of new and used loans increased in the fourth quarter to heights not seen in nearly four years.

Credit unions originated 20.9% of auto loans and leases during the three months ending Dec. 31. The percentage has been steadily rising since falling to 17.2% in the first quarter of 2021.

Their 13.7% share of new loans was up from 12.2% in the third quarter and 11.2% in 2020’s fourth quarter.

For used car financing, credit unions had a 25.9% share in the fourth quarter, up from 25.5% in the third quarter and 23.8% a year ago.

The shares reported by Experian based on the number of loans and leases differ from the share of auto loan balances, which exclude leases and can vary based on runoff trends and loan sales.

Comparing unadjusted data from the Fed’s G-19 Consumer Credit Report with CUNA’s monthly estimates, credit unions held 31.1% of the nation’s motor vehicle loans as of Dec. 31, unchanged from Sept. 30 but down from 31.5% in December 2020, 32.2% in December 2019 and a high of 32.6% in December 2018.

Among all lenders, Experian found:

• Borrowers financed an average of $39,721 on new cars in the fourth quarter, up 12.1% from a year earlier and up 9.2% from two years earlier.
• Monthly payments on new cars were $644 in the fourth quarter, up from $579 a year earlier and $564 two years earlier.
• The average used car loan was $27,291 in the fourth quarter, up 20.6% from a year earlier and up 30.6% from two years earlier.
• Monthly payments on used cars were $488 in the fourth quarter, up from $417 a year earlier and $396 two years earlier.
• The average term on new cars was 69.7 months in the fourth quarter, increasing only 1.1% in the past two years.
• However, used terms have lengthened more rapidly. The average was 67.4 months in the fourth quarter, up 4.1% over the past two years.

Experian is a credit reporting company based in Ireland with U.S. offices in Schaumburg, Ill., 30 miles northwest of Chicago.