Credit Union Auto Share Slips Again

Credit unions lost their lead in used car lending in the first quarter to banks, and credit unions’ share of new car financing also dwindled further, according to the latest quarterly report from Experian.

Experian’s Automotive Finance Market Report released Thursday showed credit unions originated 20.1% of the number of loans and leases for new and used vehicles in the first quarter, down from 25.2% of total financing a year earlier and 22.1% in the fourth quarter.

Melinda Zabritski, Experian’s head of automotive financial insights, said captives’ market share for new vehicle financing jumped to 61.8% —its highest level since 2010 and taking share from both banks and credit unions.

“The return of new vehicle inventory has had a ripple effect across the automotive finance market,” Zabritski said. “Not only are we seeing in-market shoppers transition away from the used vehicle market but we’re starting to see the resurgence of leasing.”

The Experian reports fill a gap in reporting, acting as a shadow statistic for originations. Although auto lending accounts for about a third of the balance sheet for credit unions, there is no publicly available data for originations. The exception is occasional reports from about a dozen credit unions that have sponsored auto loan securitizations and are required to report the data by credit rating agencies.

The CFPB is considering collecting auto lending data, including originations, annually from credit unions that made 20,000 or more loans in the prior year.

Experian found credit unions originated 28.0% of used car loans in the first quarter, compared with 28.4% for banks. Credit unions’ share of used car loans fell from 27.6% a year earlier and 29.6% in the fourth quarter.

Banks led in used car lending from at least 2018 through mid-2022. Credit unions took the lead in the third quarter of 2022 and kept it through the end of 2023 — except for the first quarter of 2023.

The story for new cars wasn’t any happier.

Credit unions’ share of total new car loans and leases was 9.7% in the first quarter — its lowest since at least the first quarter of 2018. It was down from 17% a year earlier and 12.1% in the fourth quarter.

Credit unions and banks both have higher shares when looking just at loans, but the patterns are similar. Credit unions had 13.3% of new car loans in the first quarter, down from 21.3% a year earlier. Banks had 25.9% of new car loans in the first quarter, down from 27.6% a year earlier.

Credit unions’ share of total new and used car loans was 22.9% in the first quarter, compared with 27.4% a year earlier and 25% in the previous quarter. Credit unions first-quarter share of total loans was its lowest since 22.8% in the third quarter of 2021.

Overall trends reported by Experian include buyers increasingly relying on cash, lower loan amounts but higher monthly payments and an increase in leasing. Leases accounted for 24.1% of new cars financed in the first quarter, up from 19.3% a year ago and 21.8% two years ago

Electric vehicles contributed to the leasing revival. EVs accounted for 8.6% of all new vehicles financed in the first quarter with leasing making up 35.2% of EV financing, up from 12.3% a year ago.

Of the top five leased EV models in the first quarter, Tesla Model Y made up 39.3%, followed by the Tesla Model 3 (11.9%), Tesla Model X (3.7%), Rivian R1S (3.0%) and Volkswagen ID.4 (3.0%).

“With more manufacturers rolling out a diverse range of EV models and a wider availability of tax incentives, we’re seeing consumers lean into the EV market, particularly with leasing,” Zabritski said. “As technology evolves and infrastructure continues to develop, it’ll be interesting to see the buying preferences for these consumers once they come off lease.”

Other details from the report include:

• New cars accounted for 41.9% of vehicles financed in the first quarter, up from 37.9% a year ago and 40% two years ago.
• Cash is growing. It accounted for 63% of used cars financed in the first quarter, up from 59% a year ago and 58% two years ago. Cash was 20% of new cars financed in the first quarters of 2024 and 2023, up 15% two years ago.
• Those willing or able to finance have better credit scores. The average score for new car buyers with financing was 755, which has risen steadily from 737 in 2019. Used car buyers scores were 686, which has risen from 655 five years earlier.
• The average new car sold for $40,634 in the first quarter, down from $41,115 a year earlier.
• New car loans had average rates of 6.73% for new cars, up from 6.61% a year ago and 4.13% two years ago.
• New car payments were $735 per month in the first quarter, up from an average of $732 a year earlier and $577 three years ago. And 16.6% of monthly loan payments were more than $1,000 in the first quarter.
• New car terms were 67.6 months in the first quarter, up from an average of 66.6 months a year ago.
• New loan amounts are down $480, or 1.17%, from a year ago, but up $150, or 0.4%, from the fourth quarter.
• The average used car loan in the first quarter was $26,073, down slightly from $26,571 a year ago, but up from $22.355 three years ago.
• The average used car payment was $523 per month, about the same as a year ago, but up from $414 three years ago.
• The average used car rate was 11.91% in the first quarter, up from 11.40% a year ago and 8.7% three years ago.
• The average used car term was 67.4 months, about the same as a year ago and up from 65.7 months three years ago.
• Monthly loan payments of $1,000 or more accounted for 4.6% of loans bought from franchises and 2.3% of those from independent dealers. Payments under $400 were 29.7%% of franchise purchases and 37.9% of independent dealer purchases.
• The average loan-to-value for used cars was 116% in the first quarter, down from 123.7% a year ago and 119% three years ago.
• New and used loans 60 days or more delinquent accounted for 1.03% of total balances as of March 31, up from 0.89% a year ago and 0.84% five years ago.