Credit Unions Capture Majority of Q3 2022 Auto Market Share

The automotive finance market is dynamic, and data in the third quarter of 2022 showed us this again. Credit unions have become the auto financier of choice for consumers: Experian’s “State of the Automotive Finance Market Report: Q3 2022” found that credit unions snagged the largest overall market share, making up 28.44%, from 20.21% in Q3 2021.

It’s noteworthy that credit unions surpassed captives and banks for the first time in history – with captives decreasing from 26.64% to 21.89% year-over-year, and banks going from 32.51% in Q3 2021 to 27.32% this quarter.

Credit Unions Increase New Vehicle Financing

There are a number of reasons why credit unions took the lead in market share this quarter, one of them being they offer lower interest rates compared to other lenders. For instance, in Q3 2022, credit unions had an average interest rate of 4.43% for new vehicle loans and 5.94% for used.

Looking at the other lenders, captives’ average interest rate this quarter was 4.56% for new vehicle loans and 8.80% for used, while banks came in at an average of 6.06% for new and 8.36% for used in Q3 2022.

Historically, credit unions have been focused on used vehicle financing, but with their interest rates being notably lower – for both new and used financing – data shows they are making a splash in new vehicle financing as well.

For example, credit unions saw a striking increase in new vehicle market share, going from 16.91% in Q3 2021 to 28.82% in Q3 2022 – coming in just behind banks, which decreased from 36.58% to 29.53% year-over-year; while captives remained dominate, their finance share decreased to 35.34% this quarter, from 41.53% the previous year.

Furthermore, credit unions surpassed banks in the used market share for the first time – growing from 25.46% in Q3 2021 to 31.46% in Q3 2022, and banks declining from 35.01% to 28.39% year-over-year.

With credit unions comprising more space in the used market share than new, it’s important to note that consumer demand for used vehicles has become more prominent as the inventory shortage results in limited availability for new vehicles – creating more opportunities for credit unions to continue gaining market share.

Breaking Down New and Used Vehicle Financing Trends

Consumers are opting for used vehicles due to the used market having more availability, as well as the price increase this quarter not being as significant year-over-year when compared to the jump this time last year as a result of the inventory shortage.

In Q3 2022, the used vehicle loan amount increased 8.59% year-over-year, reaching $28,506 – which is considered to be more of an average growth when looking at the 21.37% year-over-year spike in Q3 2021, from the 5.14% year-over-year increase in Q3 2020.

On the new vehicle side of financing, the average loan amount increased 10.36% year-over-year in Q3 2022, from the 8.87% year-over-year growth in Q3 2021.

Despite the average year-over-year increases not being as drastic, it still resulted in average monthly payments hitting record highs this quarter. With the average monthly payment for a used vehicle increasing from $472 in Q3 2021 to $525 in Q3 2022, and the average monthly payment for a new vehicle hitting $700, from $618 this time last year.

While the finance market seems to be leveling out this quarter, it’s important for credit unions to watch these trends closely as they maintain their spot in both new and used financing.

Prime Buyers Continue to Dominate Financing

Taking a deeper dive into who is currently financing these vehicles, prime-plus consumers with a credit score between 661 and 850 made up over 66% of the total share – with prime having a slight uptick, going from 46.19% in Q3 2021 to 46.67% in Q3 2022, and super prime making up the remainder at 19.34%, from 19.28% the previous year.

However, it’s noteworthy that the deep subprime segment saw a slight increase this quarter in quite some time, going from 1.76% in Q3 2021 to 1.85% in Q3 2022. This is a change of scenery for this segment, considering it has continuously declined in recent years, going from 3.19% in Q3 2019 to 2.49% in Q3 2020. There are numerous factors behind this, including the market shifting to become more prime and consumers in the subprime segment not returning to the market as quickly during the pandemic.

As lenders and dealers continue to navigate their way through the automotive finance market that remains ever-changing, analyzing and understanding data and trends will enable them to think strategically as they help consumers search for a vehicle that fits their needs.

Melinda Zabritski Senior Director of Automotive Financial Solutions Experian Schaumburg, Ill.