Spike in Credit Union Auto Share Confirmed by Experian Data
Credit unions produce 25.8% of loans and leases in the second quarter, continuing a string of increases.
More than a quarter of people who financed a car in the second quarter did so through a credit union, according to an Experian report released Thursday.
Experian’s “State of the Automotive Finance Market” report showed credit unions produced 25.8% of the loans and leases from lenders in the three months ending June 30, up from 18.3% a year earlier and 22.1% in this year’s first quarter.
Credit unions were second only to banks’ 27.9% share and surpassed captive lenders’ 22.6% share in the second quarter.
Melinda Zabritski, Experian’s senior director of automotive financial solutions and the report’s author, said credit unions increased their share in both new and used vehicle financing.
Credit union shares set records for shares of both new car financing and used car financing based on Experian reports showing data going back to the beginning of 2017. The previous records were set in this year’s first quarter.
“With the market dynamics we’re seeing right now, the shift in lender market share makes sense, as credit unions often offer two things that consumers are seeking: Lower interest rates and longer terms,” Zabritski said. “This helps to manage their monthly payment, which is often what consumers prioritize when looking at financing options.”
Experian’s research followed trends, shown by comparing Fed and CUNA data, that showed credit unions held 33.7% of the nation’s auto loans in the second quarter based on balances. The all-time high surpassed the previous record of 32.6% set in December 2018. The share was also up from 31.8% in the first quarter and a low of 31.0% in 2021’s second quarter.
Separately, CU Direct, a California CUSO that does business as Origence, said in July that credit unions funded a record 1.3 million loans through its Origence Consumer LOS and CUDL lending platforms in the second quarter of 2022, a 23% year-over-year increase, generating $39.5 billion in credit union loans.
Experian found credit unions’ biggest gain was in new cars, where the credit union share was 21.4% — nearly double the 11.2% from a year earlier and up from 15.8% in the first quarter.
In used cars, the credit union share was 28.6% in the second quarter, up from 23.5% a year earlier and 26.5% in the first quarter.
Experian found a shift toward used vehicles among all lenders as inventory shortages continue. The trend favored credit unions, which have historically had a leading position in the market.
Zabritski said used vehicles accounted for 61.8% of vehicle loans and leases, up from 58.5% a year earlier. She said gains occurred among each credit risk tier.
“Between the inventory shortage and rising vehicle costs, consumers are looking to make the most cost-effective decision, which is often a used vehicle,” Zabritski said. “The benefit of higher vehicle values is that consumers are able to get more for their trade-ins, which can help offset the increased cost of their next vehicle.”
The shift to used came amid rising average vehicle loan amounts and monthly payments for both new and used vehicles.
The average new vehicle loan amount rose 13.2% in the past year to reach $40,290 in the second quarter, with a monthly payment of $667 compared to $582 in last year’s second quarter. The average used vehicle loan rose 18.7% to $28,534, with an average monthly payment of $515, up from $440 a year earlier.
Credit unions were still behind banks in used car financing. Banks produced 29.2% of used vehicle financing in the second quarter, down from 32% in the first quarter and a recent high of 35.4% in last year’s third quarter.
Captives gave up a little share in the used car space, but they didn’t start with much. Their share was 7.9% in the second quarter, down from 8.3% in the first quarter and a recent high of 9.8% in 2019’s third quarter.
But captives’ dominance in new car lending took a major ding. Captives had 46.1% of financing in the second quarter, down from 49.6% in the first quarter and a recent high of 62.2% in 2020’s second quarter at the start of the COVID-19 pandemic, when new car sales briefly tanked and manufacturers geared up their incentives.
The Experian report also found:
- The average loan term for new vehicle loans remained flat at 69.5 months in both the second quarters of this year and last.
- Used car terms grew from 66.2 months in last year’s second quarter to 68.0 months in this year’s second quarter.
- People with higher credit scores continued to account for a larger share of auto loans. In the second quarter, prime (45.7%) and super prime (19.6%) comprised more than 63% of all originations.
- SUVs were 60.4% of total financing in the second quarter, up from 58.6% a year earlier.
- The average difference between a new vehicle loan and lease payment was $127 in the second quarter.