ONTARIO, Calif.—New car sales, along with credit union auto lending, continued their climb in Q1, according to a new report that also advises that CUs take steps today to prepare for an approaching vehicle sales slowdown.
CU Direct in its latest State of the Auto Lending Market webinar, as well as a number of automotive industry reports, is predicting that it’s likely that early in 2017 new cars sales will plateau and begin to decline. CU Direct is encouraging credit unions to begin using more analytics tools and automated decisioning to keep the portfolio afloat and even grow it as vehicle demand wanes.
During its webinar, CU Direct said 2016 should be another strong year for new cars sales, reporting that new car sales were up 3% in Q1 2016 over Q1 2015.
“Last year was a record year for new car sales, at 17.5 million units,” reminded Jose Torres, CU Direct market research analyst. “And the momentum has continued over into this year, with projections for sales reaching 17.7 million units by the end of December.”
One In Four Go To CUs
As CUToday.info previously reported credit unions are now capturing one in every four auto loan originations. Torres said that credit unions grew auto loans by 7.5% in January, 23% in February, and 17% in March.
“It’s a clear that credit unions continue to outpace all other industry lenders for used and new car loan growth,” said Torres, noting as he did last quarter that CUs are now the number-two lender type, ahead of captive finance companies. CUs are closing in on 21% market share, at a time when banks’ share of the market is declining.
CU Direct credit unions performed well in Q1. CU Direct credit unions, collectively, continue to hold onto their position as the third-largest auto lender behind Ally and Wells Fargo. The group’s 16% March year-to-date growth is about double that of any other lender nationally.
Torres pointed to positive signs for credit union indirect lending, sharing that indirect loans at CUs have climbed markedly in the last five years while delinquencies in this category are holding steady.
“From 2010 to 2015 indirect lending at credit unions has almost doubled, growing at a 14.4% compound annual growth rate,” said Torres. “That is amazing.”
The increase has come at a time when CU membership growth has marched upward as well. Torres said that six out of 10 new credit union members come aboard via the indirect channel.
“From 2012 to 2015, credit union indirect delinquencies have consistently remained low, at about 78 basis points in 2012 to 73 BPs today,” said Torres. “So as credit unions continue to grow their indirect lending, their delinquencies and charge-offs continue to be flat, and lower than that of any other lender.”
Delinquencies Ticking Up
Torres added that all other lender categories, outside of CUs, are beginning to see a slight rise in delinquencies.
Turning to leasing, Torres sees only signs that this category will continue to gain appeal with consumers. With leasing now at a record 31% of all new car sales, Torres said he conducted research to see if this is a U.S. phenomenon.
“I found that in the U.K. leasing represents 61% of all new car purchases,” said Torres, who thinks that is a sign that leasing stateside will continue to grow. “The financing side is declining while leasing is increasing. This is something to pay attention to.”