Credit unions’ share of auto financing grew slightly in the second quarter benefitting from refinancings, but banks gained even more total share, according to Experian.
New data in Experian’s State of the Automotive Finance Market report showed credit unions are benefitting from their large and growing share of refinanced loans.
Credit unions’ share of refinances has risen steadily from 62.3% in the first quarter of 2024 to 68.3% in this year’s second quarter. Shares were 21.5% for banks and 10.2% for finance companies in the second quarter.
Credit unions had the best deals. The average monthly savings in the second quarter was $87 at credit unions, compared with $46 at banks and $13 at finance companies.
Melinda Zabritski, Experian’s head of automotive financial insights and the Aug. 28 report’s author, said consumers saved just over 2 percentage points on their interest rates by refinancing in the second quarter, reducing their monthly payments by $71, the largest monthly savings in at least five years. Savings were $41 a year earlier and $55 in the first quarter.
“Although affordability continues to be a topic of conversation in the automotive industry, with interest rates trending downward, we’re seeing more borrowers taking the opportunity to lower their monthly payments,” Zabritski said. “Banks and credit unions remain key players in the auto refinancing space, offering a range of options that may help borrowers secure better terms.”
Experian data going back to 2020 shows refinancing by all lenders peaked in the second quarter of 2022, when 167,000 loans worth $4.7 billion were refinanced. The lowest quarters were the fourth quarter of 2023 and the first quarter of 2024 when about 58,000 loans worth $1.7 billion were refinanced in each quarter.
In this year’s second quarter, 115,000 loans worth $3.6 billion were refinanced, up from $2.0 billion a year earlier and $3.3 billion in the first quarter.
The average borrower waited 25.7 months to refinance in the second quarter. The time to refinance has been declining since hitting a five-year peak of 30.9 months in the fourth quarter of 2023.
The average refinance in the second quarter reduced the interest rate from 10.45% on the original loan to 8.45% on the refinanced loan. That gap has been typical since 2023, but the gap was about 3 percentage points for the first nine months of 2022.
The Experian report showed credit unions continued to regain share of new car loan originations in the second quarter, but lost ground in used car lending.
Credit unions’ share of total financing — loans and leases on new and used vehicles — was 21% in the second quarter, up from 20.4% a year earlier and 20.6% in the first quarter. Since 2018, credit unions’ share of total financing peaked at 25% to 29% from the second quarter of 2022 through the first quarter of 2023. Their lowest periods were 19.4% in 2024’s fourth quarter and 18.5% to 19% in the first quarter of 2021.
Banks led with 27.5% of total financing in the second quarter, ending a two-year streak when captives led. Banks’ share was their highest since their 27.8% share in the second quarter of 2022. Their share ranged from about 29% to 33% from 2018 through 2021. It was 24.5% in last year’s second quarter and 26.6% in the first quarter.
Captives’ share was 26.6% in the second quarter — their lowest share since 21% in the third quarter of 2023.
Finance companies increased their share to 15.5% in the second quarter, up from 10.1% a year earlier and 8.9% in the first quarter.
In new car lending, credit unions’ share of loans was 16.8% in the second quarter, compared with 14.3% a year earlier and 15.3% in the first quarter.
In used car lending, credit unions lost share and banks gained it from the first quarter to the second quarter.
Credit unions’ share of used auto loans was 27.6% in the second quarter, unchanged from a year earlier, but down from 28.2% in the first quarter. Credit unions had about 29% to 34% of used car loans from 2018 through 2023, but finance companies have gained share since 2021 and banks have been regaining share since 2023.
Contact Jim DuPlessis at JDuPlessis@cutimes.com.
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