While many credit unions are expecting an 8% gain in auto loans next year, they'll have to be nimble and quick to make those numbers in a tightening U.S. market, an industry analyst told credit union executives Friday.

Sales growth is slowing for new cars. This will trigger manufacturers to offer rebates and dealers to become more aggressive “to get deals done while the customer is in the showroom,” said Michael Cochrum, vice president of analytics and advisory services for CU Direct, an Ontario, Calif.-based CUSO.

Dealers will be pressing lenders to be faster at approving and funding loans.

“If you're not willing to up your service level, someone else probably will be,” Cochrum told credit union executives during CU Direct's “State of the Auto Lending Market” webcast.

Also in 2017, more customers will be shifting their sights from that new car to its late-model used version to save $5,000 to $10,000. With large numbers of cars coming off leases, “there's going to be plenty of availability of nice used cares for consumers to buy,” Cochrum said.

And credit unions, which have long been a leading lender for used cars, should benefit.

Cochrum warned credit unions not to be so eager to offer lower interest rates that they needlessly sacrifice profits, which he said some statistics indicate by spreads between rates offered by banks and credit unions of more than 25 basis points. “At the end of the day, dealers can sell rates,” he said.

Credit unions sold about 17% of the number of new cars sold in October, and 24% of the used market, which accounts for about 73% of credit union auto loan volume.

Measured by loan value, credit unions held 27% of the $1.1 trillion U.S. total for new and used cars for the third quarter, while banks held $405 million, a 37% share, according to the FDIC and CUNA Mutual Group.

By definition, those numbers exclude cars acquired by leases, which have grown to account for one in three transactions.

“The credit unions are doing a great job of indirect lending and gaining market share,” Cochrum said.

Instant Insights /

Credit Unions Need Speed to Make 2017 Auto Loan Goals

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