Credit unions have always held a structural advantage in auto lending: A membership relationship built on trust rather than transaction. But trust alone does not retain members when the financial pressures they face outpace the solutions their credit union offers. What is happening in early 2026, including rising fuel costs, record vehicle repair expenses, compressed loan volumes and a refinancing wave gathering momentum, is both a stress test of that relationship and an opportunity to deepen it. The credit unions that respond with purpose will emerge from this cycle with stronger portfolios, more engaged members and a larger share of the auto lending market.
Your Members Are Keeping Their Cars Longer — and Getting Nervous About It
Higher gas prices have introduced a new layer onto an already strained affordability picture. When the cost of fueling a vehicle climbs alongside the cost of financing a new one, consumers make a predictable choice: They hold on to what they have. That behavioral shift has real consequences for your loan portfolio. Members who defer new vehicle purchases stay in older cars, which means higher exposure to mechanical failure, more potential for a loan-impairing breakdown, and a member who is quietly anxious about costs they may not be able to absorb.
Vehicle repair costs are now at historic highs, driven by labor shortages and elevated parts prices that show no meaningful sign of reversing. Credit unions see this reality faster than most: When a member's car breaks down and they cannot afford the repair, the downstream effects on loan performance are direct. A mechanical failure does not stay a mechanical event for long. It becomes a missed payment, a delinquency, a charge-off. For members whose vehicles aren't financed through the credit union, or who have already paid off their loan, the risk doesn't disappear. A major repair bill with no coverage often lands on a high-interest credit card or becomes an unsecured personal loan, compounding financial stress in ways that ripple back into the member relationship regardless. The member relationship that took years to build can unravel quickly when a vehicle problem the member had no protection against becomes a financial crisis.
Service Contracts Are a Portfolio Protection Tool, Not Just a Revenue Line
Many credit unions think about vehicle service contracts primarily as a source of non-interest income, a modest but useful revenue stream in an environment where interest income has compressed as loan volumes have softened since their 2021-2022 peak. That framing is accurate but incomplete. The more compelling case for integrating service contracts into your auto lending program is what they do for your loan portfolio and your members.
A member who finances a vehicle through your credit union and carries a service contract is a member who is insulated from the repair cost shock that might otherwise derail their payments. Fewer unexpected repair bills translates into fewer delinquencies. Fewer delinquencies means fewer charge-offs. The non-interest income is real and worth capturing, but the portfolio protection it enables is the more durable argument – and the one that resonates most directly with how credit unions are structured to think about member financial health.
The Refinancing Window Is Opening — Be Ready to Own the Moment
If interest rates decline meaningfully in the coming months, a significant volume of auto loans originated in 2023 or later at elevated rates will become candidates for refinancing. Members sitting in those loans will be looking for relief, and credit unions that have built the infrastructure to deliver it — digital portals, streamlined member experiences, third-party intermediary relationships — will be positioned to capture share they ceded to captive lenders and banks during the high-rate cycle.
The refinancing transaction is also one of the most underutilized moments in the member journey for introducing protection products. A member who is already engaged in a financial conversation about their vehicle, who is already thinking about monthly payments and long-term costs, is highly receptive to a service contract discussion. Credit unions that treat the refinancing moment as a complete member interaction, including rate relief plus protection, will generate better outcomes on every dimension: Member satisfaction, non-interest income and portfolio quality. Those that treat it as a pure rate transaction will leave meaningful value behind.
The Pendulum Is Swinging Back. Be There When It Arrives
Credit unions held a significant share of the auto lending market in 2021 and 2022. That share eroded as rates rose and captive lenders competed aggressively. The credit unions that will recapture the most ground are not necessarily the ones with the lowest rates. They are the ones that show up as the most complete financial partner for members navigating a complicated ownership environment.
This means having a service contract program that is easy to present and easy for members to understand. It means building or partnering on digital refinancing infrastructure before the rate environment demands it. It means training staff to connect protection products to the member's actual financial situation — not as an upsell, but as a logical extension of the lending relationship. The credit unions asking these questions now will be the ones members turn to when the moment arrives. The window will not stay open indefinitely.
Tim Blochowiak is Vice President-Sales, Client Wealth, Financial Institutions & Training for Protective Asset Protection, a Chesterfield, Mo.-based provider of F&I programs offering vehicle protection plans, GAP, ancillary products, training and other services through credit unions, financial institutions and vehicle dealerships.
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