Credit Union Auto Loan Share Rises — Barely

Experian shows credit unions originated 23% of new and used auto loans in the second quarter, up 20 basis points from the first quarter.

Credit unions slightly increased their share of auto lending from the first quarter basement to the second quarter, according to the latest Experian report.

But while the gain was tiny, the fact that it broke a streak of declines is a ray of sunshine.

Experian’s State of the Automotive Finance Market for the second quarter released Sept. 5 showed credit unions originated 23.1% of the number of new and used car loans in the second quarter, down from 25.7% a year earlier but up from 22.9% in the first quarter.

Credit unions’ share of total financing, which includes a growing number of leases, was smaller:

  • Credit unions’ share of total financing was 20.2% in the second quarter, down from 23.3% a year earlier and up from 20.1% in the first quarter.
  • Banks’ share of total financing was 24.4% in the second quarter, down from 24.7% a year earlier and 25.1% in the first quarter.
  • Captives’ share of total financing was 30.9% in the second quarter, up from 28.5% a year earlier and down from 31.4% in the first quarter.

Captives’ share has been above 30% since 2023’s third quarter. Captives’ share rose 3 percentage points of the past year and finance companies’ share rose 1 point to 14.6%. Banks lost 1 percentage point and credit unions lost 3 points.

Melinda Zabritski, Experian’s head of automotive financial insights, said growing dealer inventories are leading captives to provide more incentives, increasing both their leading share in the new car market and their small share of the used market over the past year.

“With captives continuing to offer incentives, it’s expected to see their share grow across the spectrum,” Zabritski said.

Melinda Zabritski

Captives’ share of new car loans and leases was 60.6% in the second quarter, up from 57.3% a year earlier but down slightly from 61.8% in the first quarter. Their share of used auto loans was 8.5% in the second quarter, up slightly from 8.4% a year earlier but down from 8.7% in the first quarter.

The first quarter was one of the worst for credit union auto lending in years, and the second quarter was only slightly better because of a gain in new car loan share.

Credit unions’ share of total new car loans and leases was 10.3% in the second quarter, down from 14.4% a year earlier but up from 9.7% in the first quarter.

Credit unions’ share of used car loans was 27.6% in the second quarter, down from 29.5% a year earlier and 28% in the first quarter.

But banks did even worse: Their used share was 26.8% in the second quarter, allowing credit unions to reclaim their position as the largest lender for used cars. In the first quarter, banks led with 28.4% followed by credit unions’ 28.0%.

Used car wholesale prices declined from March 2023 to June 2024, but Cox Automotive reported Monday that they rose strongly in both July and August.

But Cox Automotive reported Tuesday that average transaction prices for new cars in August were down for the 11th month in a row. The average transaction price (ATP) fell 0.6% over the past 12 months to $47,870 in August.

Cox Automotive’s Kelley Blue Book showed the average incentive package in August equaled 7.2% of ATP, up from 7.0% in July to the highest level since the first half of 2021. A year ago, incentive spending was 4.8% of ATP. In the past decade, incentive spending peaked at 10.8% of ATP in December 2019.

Erin Keating, Cox Automotive’s executive analyst, said dealers reported a muted sales pace and growing pressure to lower prices in August.

Erin Keating

“In the face of a sluggish sales pace — 15.1 million in August — more dealers are pulling the only lever they have: higher incentives,” Keating said. “This shift to a buyers’ market is good news for consumers but certainly impacts dealer profitability.”

“Automakers are coming to the table with more incentives, but credit remains tight, putting more pressure on dealers to get creative with additional discounts and financing, affecting the bottom line,” she said.