Member Confidence Drives Auto Loan Growth: CUNA Mutual
A combination of increasing consumer confidence and less-aggressive financing incentives from manufacturers continue to help credit unions grow their vehicle loan portfolios.
According to CUNA Mutual Group’s October Credit Union Trends Report, at $197 billion, credit union-held member vehicle loans were up 19% from their low point in March 2011 and were up 10.8% during the past 12 months. The report tracked data through August.
A combination of factors is propelling this remarkable reversal of trend, wrote Dave Colby, CUNA Mutual chief economist, in the report.
The drivers include improved consumer sentiment and the increasing need to replace an aging vehicle fleet, with the average age being 11.2 years, according to industry tracker R.L. Polk. Other factors include less- aggressive financing incentives from manufacturers and home equity loan rates that are higher than vehicle loan rates, Colby said.
Used vehicle loans were at an all-time high and the 10.2% gain accounted for 30% of all credit union loan growth since August 2012, the data showed. New vehicle loans were up 8.2% year-to-date and 11.9% year-over-year. This portfolio accounted for 19% of all credit union loan growth during the past year despite equaling just 10.8% of all loans.
“Looking forward, we see tremendous opportunities for continued portfolio expansion. Meeting the vehicle financing needs—purchase or recapture with better terms—of the surging membership base, will provide the fuel for growth,” Colby said.
In other lending areas, credit unions remain cautious with respect to member business lending, Colby noted. This portfolio segment, which represented 7.0% of all credit union loans as of August, was up just 2.2% year-over-year.
“Most credit unions participating in this lending arena would like to book more loans,” Colby said.
At $644 billion, loans were up 4.7% year-to-date and 6.4% year-over-year, according to the report. Almost half of the gain was attributable to the remarkable surge in vehicle loan portfolio expansion, Colby said. Fifty-three percent was from additions to member first mortgages, he added.
“We see loan growth finishing the year above 6.0%. This result will be driven by strong consumer installment credit (in) vehicles and credit card loans and a moderate level of fixed-rate first mortgage loans sales,” Colby said. n