Credit Unions Remain at the Forefront of Used Vehicle Market Share

As the automotive finance market continues to shift, credit unions’ role in the used vehicle space remained prominent in the fourth quarter of 2023.

In fact, Experian’s “State of the Automotive Finance Market Report: Q4 2023” found that while credit unions experienced a slight decrease in market share from a year ago, they still captured most of the used vehicle market at 29.6%. Meanwhile, banks declined from 27.1% last year to 26.7% this quarter and captives went from 8.2% to 9.6% year-over-year.

When breaking down the used vehicle finance market, the average loan amount declined to $26,685 in Q4 2023, from $27,907 in Q4 2022. However, the average interest rate grew to 11.9%, from 10.4% in the same time frame – resulting in the average monthly payment increasing $2 to $532 this quarter. Furthermore, the average loan term in Q4 2023 was 67.4 months, down from 67.9 months last year.

Another trend credit unions should keep in mind, as they typically focus on the prime space, is that prime and super prime consumers comprised nearly 60% of used loans in Q4 2023, coming in at 43.9% and 14.7%, respectively.

New Vehicle Finance Market

While the used vehicle segment is fundamental for credit unions, having an understanding of new vehicle finance trends can uncover additional opportunity.

For instance, data in the fourth quarter of 2023 showed captives continued to lead the new vehicle market share at 61.2%, from 49.7% in Q4 2022. On the other hand, banks declined from 23.9% last year to 20.4% this quarter and credit unions went from 20.9% to 12.1% year-over-year.

Looking at new vehicle finance trends, the average loan amount declined from $41,509 in Q4 2022 to $40,366 in Q4 2023, while the average interest rate increased from 6.1% to 7.2% in the same time frame – bringing the average monthly payment to $738 this quarter, from $720 last year. In addition to that, the average loan term went from 69.3 months to 67.9 months year-over-year.

Overall Vehicle Finance Market

When examining the vehicle finance market as a whole, it’s evident that certain factors – such as what vehicle segment consumers are leaning toward – play an important part as lenders find ways to properly assist consumers and expand their presence to capture more market share.

In Q4 2023, the percentage of new vehicles financed increased to 42.3%, from 38.4% in Q4 2022, and for used vehicles, it declined from 61.6% to 57.7% year-over-year. This is potentially due to more incentives being introduced and new vehicle inventory rising.Top of Form

Diving into the market share of total financing, captives took the lead in Q4 2023 – coming in at 31.6%, from 24.3% last year. Meanwhile, banks declined from 25.9% last year to 24% this quarter and credit unions went from 27.5% to 22.1% over the same period.

With vehicle prices decreasing year-over-year and some lenders offering rates below average, it’s not out of the ordinary to see a resurgence of consumer interest as more return to the market to purchase vehicles. By adapting new strategies and leveraging data to reach the right audience, credit unions have the opportunity to gain overall share.

Melinda Zabritski is Head of Automotive Financial Insights for Experian.