Credit Union Auto Loan Market Share Jumps in Q1 2022

Over the past few years, we’ve seen credit unions’ share of the auto finance market decline, while captives’ have steadily increased – mostly a result of strong incentives offered at the beginning of the pandemic. That said, it seems the tables turned in the first quarter.

According to Experian’s “State of the Automotive Finance Market Report: Q1 2022,” credit unions experienced their highest total market share in five years – reaching 22.06% in Q1 2022, up from 18.55% in Q1 2021. This is significant growth for credit unions, considering their market share has been declining over the last few years, going from 21.15% in Q1 2018, to 20.21% in Q1 2019 and 19.28% in Q1 2020.

The gains for credit unions came mostly at the expense of captive lenders, which saw market share reduce to 25.38%, from 29.75% in Q1 2021. This is the first time captives have experienced a decrease in a few years, as their market share grew from 25.94% in Q1 2018, to 26.06% in Q1 2019 and 26.15% in Q1 2020.

Taking a Deeper Dive Into Finance Market Share Trends

Historically, credit unions have focus on lending in the used vehicle space, but that may be changing. In Q1 2022, credit unions’ new vehicle financing market share grew – going from 10.77% in Q1 2021 to 15.79%. In addition, credit unions continued growth – more than expected – in the used space, with credit unions’ used vehicle financing increasing from 24.45% to 26.48% year-over-year.

Similar to their total auto finance market share, captive lenders experienced a decrease in new financing, going from 56.79% in Q1 2021 to 49.56% in Q1 2022. And their used financing market share also declined to 8.31% from 9.29% the previous year.

Paying attention to data and trends will be helpful to understand not only market share, but also additional factors and insights.

Financing Trends Toward Prime Buyers

Looking at who is financing vehicles currently, prime and super prime borrowers remain dominant –making up just over 64% of total financing in Q1 2022, with prime increasing to 45.45% from 42.92% the previous year and super prime comprising the other 18.96% this quarter.

While the prime segment saw significant growth, the subprime market experienced significant decrease – the total subprime share fell to just over 17% overall in Q1 2022, with subprime decreasing to 15.01% from 16.01% year-over-year. Additionally, deep subprime decreased from 2.5% to 2.12% in the same time frame.

Subprime originations have decreased steadily for the past few years for a number of reasons, such as credit overall moving more prime as more consumers are actively managing their credit.

New & Used Vehicle Financing

As the automotive industry continues to navigate through inventory shortages, the value of vehicles continues to inflate, resulting in some notable year-over-year increases in average vehicle loan amounts and monthly payments.

In Q1 2022, the average new loan amount increased by $4,155 from the previous year, reaching a high of $39,540 – inevitably leading to an average monthly payment increase for new vehicles, going from $577 to $648 year-over-year.

The average used vehicles loan amount saw a more significant surge, going from $22,378 in Q1 2021 to $27,945 Q1 2022. As a result, the average monthly payment exceeded $500 for the first time – reaching $503 this quarter, up from $414 the previous year.

With average vehicle loan amounts increasing so significantly, consumers are looking to save wherever they can, and credit unions often offer the most competitive interest rate for vehicle loans when incentives aren’t available – creating more near-term opportunities for credit unions in new and used financing.

Staying close to the data and leveraging analytics to understand the trends will enable credit unions to sustain growth within the automotive industry and make more informed lending decisions in the quarters to come.

Melinda Zabritski is senior director of automotive finance solutions for Experian, headquartered in Schaumburg, Ill.