IRVINE, Calif.—As Origence reports it delivered a record amount in credit union loans through its lending platforms in 2021, the company said it expects volume to remain strong in 2022 and that some “normalizing” of what has become a highly unusual automobile market will also take place this year.
As CUToday.info reported earlier, credit unions using the Origence Lending 360 and CUDL lendingplatforms generated a record $57.4 billion in credit union loans in 2021, surpassing the company’s record $43.5 billion in loans funded in 2020.
Overall, the CUDL auto lending network helped credit unions fund a record $46.9 billion in auto loans in 2021, while CUDL credit unions, as an aggregate, were the largest auto lender in the nation in 2021, experiencing 13% loan growth according to data from AutoCount cited by Origence.
The CUDL Network expanded to include 16,000 auto dealers nationwide in 2021.
CEO Tony Boutelle said credit unions on the Origence platforms are again the number-one auto lender in the U.S. in aggregate.
“I think credit unions just have a lot of money to loan out. They were very aggressive in making loans,” Boutelle said. “Our market share didn’t grow a ton. New cars grew about two percentage points from 11% to 13% on a smaller base as a result of the (original equipment manufacturers—OEM) stuff and subvention. I would say the mix was 71% used, 29% new on a transactional basis. New cars are bigger loans, so it really wasn’t that big from a dollar amount.
“But credit unions are still being pretty competitive in new cars and I think that is a pretty impressive thing,” he continued. “That’s the power and the impact of the dealership, of being there and being a partner with dealers and making loans instead of always using their OEMs.”
One Dealer’s Unhappy/Happy Moment
The ongoing state of the car market in which chip shortages and other issues have crimped manufacturing, leading to higher prices for both new and used vehicles—with the latter often being priced higher than when new—should begin returning to something closer to “normal” this year, said Boutelle, citing discussions he has had with auto dealers.
Brian Hamilton, CUDC president, said that anecdotally Origence has heard from dealers saying they have more vehicles on their lots. Both Hamilton and Boutelle spoke with CUToday.info during CUNA’s GAC.
“It’s going to take some time--probably through the end of the year,” said Boutelle. “I think dealers are happy about that. I did talk to a dealer in New York and he said, ‘I look at my lots and I don’t see any cars and I get really depressed. I look at my financials and I get really happy.’ He is making so much on the cars he is selling.
Risk With Borrowers?
The higher—in many cases, much higher—values of both new and used cars would seem to suggest borrowers are at increasing risk of becoming upside down in their loans.
“They could be if (values) come down fast and there is some kind of event that causes people to lose their jobs, then it may be a problem,” said Boutelle. “But if it comes down slowly and there is no big event where people are out of work, then I think we’ll be fine. If they qualify to get into that payment at the beginning, then it may just be the refi aspect of that may be harder if the collateral has normalized, because it’s about 40% over where it was. So, if the collateral normalizes and that will take some time. We’re hearing that as more cars get on the lots and people start going to new cars from used cars, then we’ll see that normalizing taking place.”
Terms are Changing
But to keep payments affordable on more expensive vehicles requires a change in terms, and Boutelle acknowledged it’s taking place.
“Terms have gotten longer. That’s one thing credit unions do, they make loans more to the person than they do on the collateral,” he said. “Banks have kept terms a little shorter because of the collateral. I think credit unions are usually about six months longer on average, probably around a 71-month average. There is a lot of refi going on. The collateral, the car itself, is lasting longer. We can extend the terms on these things after someone has seasoned it for six months or a couple of years, and they can put in a longer term. We’re seeing a lot of credit unions do that.”
Added Hamilton, “The pie is smaller, but credit unions are getting a larger share of that smaller pie and part of that is because prices are higher. Credit unions offer longer terms and lower rates; that’s why we’re capturing the loans.”