Credit union economists have mixed feelings on whether newvehicle loans will really see some steam this year.

While the rate of portfolio decline at credit unions is slowing,CUNA Mutual Group Chief Economist Dave Colby said his discussionswith credit union leaders nationwide indicate the slowdown in therate of decline is from reduced levels of amortization, payoffs anddefaults, not new loan originations.

“Credit unions continue to slowly build their used vehicle loanportfolios on an annual basis. The new vehicle portfolio is less ofa drag on growth after hitting peak contraction of 17.1% in October2010,” Colby said in CUNA Mutual's May Credit Union TrendsReport.

The current forecast assumes that continued declines in newvehicle loans will not be offset by modest gains in the usedportfolio, Colby said, adding he expects vehicle loans to fallagain in 2011 before turning fractionally positive in mid-to-late2012.

Year-over-year total vehicle loan demand for credit unionsincreased from February's pace of a negative 4.8% to a negative 4.1% in March,according to NAFCU's May Economic and CU IssuesMonitor.

New vehicle lending for all credit unions year over year throughMarch continued to contract by 14.5% to $61.9 billion while usedvehicle loan demand grew by 3.4% to $103.1 billion. At the end ofMarch, vehicles totaled $165 billion, which comprised 28.7% oftotal loans.

In an early May survey of the industry's five regions, NAFCUfound that expectations for new vehicle loan demand were negative.Four of the five regions are expecting a decrease in loan demandover the next 12 months. Meanwhile, expectations for used vehicleloans were positive, will all five regions expecting an increase inloan demand for the same time period.

Still, NAFCU Chief Economist Tun Wai is optimistic aboutnew vehicle loans, saying in the report “the outlook for thenew vehicle market is improving and should show a steady upwardtrend as the overall U.S. economy improves.”