CU Direct: Declining Auto Sales a Boon to Buyers, Test for Lenders
CU Direct reported overall car sales will fall this year with used car sales and leasing accounting for an increasing share of transactions.
Credit unions’ traditional strength in used car lending puts them at an advantage in gaining used car loans, but manufacturers will continue to dominate the leasing business, said Michael Cochrum, vice president of analytics and advisory services for the Los Angeles-area CUSO.
Cochrum noted that real income growth has been only 1.3% a year after inflation.
“People are looking for affordable vehicle financing options,” Cochrum told credit union executives during CU Direct's State of the Credit Union Auto Lending Market webinar. “What we need to look at is making vehicle financing more affordable to members.”
Credit unions increased their share of automotive loans in 2016 as total open balances among all lenders reached a record $1.1 trillion by year's end, according to the State of the Automotive Finance Market report released earlier this month by Experian, a credit analysis company based in Schaumburg, Ill.
Consumers struggled to afford cars last year, depending increasingly on financing and turning in greater numbers to used cars and leasing, Experian reported.
Credit unions claimed 19.1% of the portfolio value of the auto loan market at the end of 2016, up from 18% a year earlier. Captives also gained share, rising from 27.8% in 2015 to 28.4% in 2016, while banks’ share fell from 35.6% in 2015 to 32.9% in 2016, according to Experian.
Cochrum said declining sales will be a bonanza of manufacturing rebates and price cutting on the lots for buyers. For lenders, it will threaten their collateral values on existing loans and put more pressure on them to act quickly to get new loans.
“We have to be faster in responding to our dealer partners when they have customers who want to buy,” he said.