Credit Union’s auto market share drops for the first time since 2011

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Source: Experiential

Credit unions have been steadily increasing their market share in auto finance for years, but data for the first quarter of 2019 presented a surprise: this trend has taken a break.

There was a slight decline in credit union market share in the first quarter of 2019, according to Experian’s most recent report on the state of the auto finance market. Credit unions saw their total auto market share drop from 6.6% to 19.9% ​​in the first quarter, but the decline in market share does not necessarily mean that credit unions are poised for a downturn. gloomy year 2019. opportunity for credit unions.

Based on data from Experian, auto loans are up significantly overall with an increase in total loan balances from $ 1.18 trillion in the first quarter of 2019 to a record high of $ 1.118 trillion in the first quarter of 2019. first quarter 2019. More and more consumers are relying on financing to purchase a vehicle, including those in higher credit scores. This is one of the factors contributing to the fact that the percentage of the total share of subprime and deep subprime loans remains low – below 23% in the first quarter.

While credit unions have experienced tremendous growth in the auto finance space over the past eight years, what does this decrease mean for credit unions in the future?

The fall in market share is surprising given the favorable credit conditions credit unions have experienced in recent years, but credit unions are still poised for growth. Credit unions have historically seen their total open auto balances reach $ 351.4 billion, showing significant growth in just two years, up from $ 286.8 billion in the first quarter of 2017. Although banks hold the most large share of the auto loan market at $ 367.5 billion, their number has fluctuated every year. -on year and was down from $ 368.7 billion in the first quarter of 2018.

Major borrowers are turning to the used vehicle market

While vehicle affordability continues to be a topic of conversation in the auto industry, trends suggest consumers continue to favor used vehicles over new ones. The percentage of prime (61.88%) and super prime (44.78%) consumers choosing used vehicles has reached an all-time high. The used vehicle industry has generally been an area where credit unions have thrived. As more privileged consumers turn to the used vehicle market, there is an opportunity for credit unions to reach out to a broader consumer base.

When you consider the rising costs of new and used vehicles, the main shift towards used vehicles is not surprising. The average loan amount for new vehicles has changed by $ 733 since the first quarter of 2018, reaching $ 32,187 in the first quarter of 2019, while loan amounts for used vehicles have increased by $ 601 by one. year over year, exceeding $ 20,000. The increases were not limited to loan amounts, however, as average payments continued to increase for both new and used vehicle loan amounts, reaching $ 554 and $ 391 in the first quarter of 2019.

Used vehicle table Source: Experiential

When it comes to the financing options that consumers use to purchase vehicles, credit unions saw a slight decline in the used financing market share from 28% in the first quarter of 2018 to 26% in the first quarter of 2019. , but they still hold the second largest share of all other types of lenders. Banks and finance companies were the only lenders to see their shares increase to 36.3% and 17.4%, respectively.

Prime and super prime consumers accounted for 57.3% of total loans, while total subprime loans remained below 23%. Average credit scores for new vehicle loans remained stable at 719, while used vehicle loans rose to 657.

Slight increase in delinquencies as average payments increase

The auto industry continues to closely monitor delinquency rates. While there was an increase in 30-day defaults to 1.98% in the first quarter of 2019, from 1.9% a year ago, it’s important to keep in mind that this is still better than industry record numbers in the first quarter of 2009, when total 30-day delinquencies peaked at 2.81%.

Despite the overall rise, a closer look at the numbers for the first quarter of 2019 shows that credit unions have the lowest default rates among different types of loans at 1.15%. Banks and financial companies have also seen their bad debts decrease. Thirty-day defaults for credit unions fell from 1.17% in the first quarter of 2018 to 1.15% in the first quarter of 2019. 60-day defaults remained relatively stable at 0.68% in year-over-year.

Table of delinquency rates Source: Experiential

Despite the slight decrease in the market share of credit unions in the first quarter of 2019, there are still many factors that make the current auto finance market a market of choice for credit unions, including an increase in the number of consumers. privileged financing the purchase of vehicles and consumers who turn to the space of used vehicles. . Understanding these trends can help credit unions scale up their strategies and make the right lending decisions to return to increased market share in the future.

Melinda Zabritsky

Melinda Zabritski is Senior Director, Auto Finance Solutions for Experian. She can be reached at 714-830-7734 or [email protected]

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