Credit Unions Gain Share in Sluggish Auto Market
New car sales fell again in May, and signs show used autos were dinged too.
Credit union resiliency showed early this year as the movement continued to gain share of new and used auto loans, while sales remained stuck in a ditch with no help on the horizon for the supply chain problems.
The U.S. Bureau of Economic Analysis reported June 3 that new cars and light trucks sold at a seasonally adjusted annual rate (SAAR) of 12.7 million in May, down from 16.9 million a year earlier and 15.5 million in April. May’s sales were the lowest since SAAR fell to 12.3 million last September.
“Supply constraints show no sign of easing,” NAFCU Chief Economist Curt Long said.
“Honda, Toyota and Ford have already announced major cuts to production for May as chip shortages continue to plague the industry,” Long said. “Higher rates may also be dampening demand, but the larger issues remain on the supply side.”
For used cars, Cox Automotive on Monday reported that May sales in the retail sub-category of certified pre-owned vehicles fell 22% from a year earlier and fell 7% from April.
Used car prices rose after three straight months of decline according to Manheim, which Long said may reflect a decline in inventories.
“NAFCU expects auto sales to remain muted and volatile over the rest of the year, as relief from chip shortages looks increasingly unlikely in 2022,” Long said.
Meanwhile, Experian’s “State of the Automotive Finance Market” report released June 2 showed credit unions produced 22.1% of the number of automotive loans and leases in the first quarter, up from 18.6% a year ago and 20.9% in the fourth quarter.
Banks’ first-quarter share was 30.8%, up from 29.8% in 2021’s first quarter but down from 31.8% in the fourth quarter.
Melinda Zabritski, Experian’s senior director of automotive financial solutions, said the share was given up by captives. Their share fell to 25.4% in the first quarter, down from 29.8% in 2021’s first quarter and 26.6% in the fourth quarter.
Credit unions are strongest in used car lending, but they made their greatest strides with new vehicles. They originated 15.8% of new car loans and leases in the first quarter, up from 10.7% a year ago and 13.8% in the fourth quarter.
“With low inventory and high consumer demand, we’re not seeing nearly as many incentives on the market,” Zabritski said. “This has resulted in an opportunity for credit unions to step in and gain market share, as they often offer the lowest interest rates.”
The used share for credit unions was 26.5% in the first quarter, up from 24.5% a year ago and 25.9% in the fourth quarter.
“Credit unions tend to focus on the used vehicle market and given the ongoing inventory shortages reducing availability of new vehicles and increasing demand for used, it makes sense to see this kind of increase in market share,” she said.
New vehicles accounted for 41% of loans and leases in the first quarter, down from 42.6% a year earlier.
Leasing fell and average loan amounts and payments continued to rise. The average new vehicle loan rose 12% over 12 months to reach $39,540 in the first quarter. Used car loans rose 25% to $27,945.