Credit Unions Experience Record High Auto Market Share in Q2 2022

With the onset of the chip shortage, captive lenders began to recede from the heavy incentives that kept sales going in the early days of the pandemic. When coupled with rising vehicle prices and interest rates, this created a unique opportunity for credit unions to achieve their highest market share in history, as they remain one of the few lenders still offering lower interest rates.

According to Experian’s “State of the Automotive Finance Market Report: Q2 2022,” credit unions’ market share increased to 25.81%, from 18.32% in Q2 2021. In comparison, captives decreased to 22.64% this quarter, from 28.47% the previous year.

This was the highest increase of total market share credit unions have ever experienced – going from 22.38% in Q2 2018 to 19.97% in Q2 2019 and 18.63% in Q2 2020.

Breaking down the data further, credit unions saw the largest growth across both new and used vehicle market share. In Q2 2022, credit unions’ new vehicle market share increased to 26.69%, from 15.27% in Q2 2021 and went from 23.49% to 28.62% year-over-year in used vehicle market share.

Meanwhile, captives’ new vehicle market share decreased from 44.88% in Q2 2021 to 36.29% in Q2 2022 and their used vehicle market share came in at 7.89% this quarter, from 8.51% the previous year.

Even as inventory shortages and other economic hardships remain prominent throughout the automotive industry, captives are pulling back on traditionally heavy incentives and seemingly continue to offer higher interest rates than other lenders – resulting in their market share decline. This contrasts with credit unions, who have historically been known to offer lower rates.

Lower Interest Rates Enable Potential Market Share Gain

While vehicle prices continue to increase, consumers appear to be searching for financing options that may alleviate the rising average monthly payment – making it important for lenders to analyze these trends and gain better insight into why the market may be shifting.

For instance, when comparing lender types in Q2 2022, credit unions offered an average new loan rate of 3.72% and average used loan rate of 5.24%. Meanwhile, captives had higher rates, coming in at 4.18% for an average new loan rate and 8.18% for an average used loan rate.

Analyzing past lender loan rates shows that captives increased their rates year-over-year while credit unions have remained fairly steady. In Q2 2021, the average new loan rate for captives came in at 3.44% and their used loan rate was 7.48%. In the same time frame, credit unions had an average new loan rate of 3.87% and an average used loan rate of 5.21%.

As consumers look into different lenders when searching to finance a vehicle, it is important for professionals to know whether they are interested in a new or used vehicle – since interest rates can majorly impact the average monthly payments.

Vehicle Financing Trends

While credit unions typically focus on the used car space rather than new, the sharp increase in their new vehicle market share this quarter indicates they may also be directing their attention to the new car space.

Although, with consumers continuing to opt for used vehicles as they search for the most budget-friendly option, credit unions have a number of opportunities to sustain growth in both new and used market share – since the used vehicle financing comprised more than half of the total finance market.

In Q2 2022, used vehicle financing came in at 61.78%, from 58.48% the previous year. While new vehicle financing made up 38.22% of the total finance market, a decrease from 41.52% in Q2 2021.

It’s not out of the ordinary for consumers to prefer used vehicles, seeing there was a noteworthy difference in the average monthly payments this quarter. For instance, the average monthly payment for a used vehicle went from $440 in Q2 2021 to $515 in Q2 2022 – compared to the average monthly payment for a new vehicle, which hit a record high of $667 this quarter, up from $582 the previous year.

While the increase in used vehicle financing can have a positive impact on credit unions’ market share gain, analyzing multiple data points will enable the lender to properly assist consumers when finding a vehicle that meets their financial needs and create more opportunities for continued market share growth.

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