Auto Lending Market Share Rises Despite Lower Outstanding Balances

Although auto loan balances have fallen as of the second quarter, credit unions still have strong momentum as they gain additional market share

 
 

Credit unions posted strong growth in the second quarter, with assets, loans, shares, and members continuing to increase. A deeper look at the loan portfolio as of June shows solid 12-month growth in nearly all components. The one area of the loan portfolio that slipped in June was new auto lending.

Auto Loan Balances Continue to Struggle

New auto loan balances outstanding at the nation’s credit unions totaled $83.4 billion as of June, a decline of 6.7% from outstanding balances in the previous year. Despite the decline in new auto loan balances, used auto lending continues to see an increase. Used auto loans totaled $93.3 billion at mid-year, an increase of 3.5%. Although used auto loan balances have increased, it was not enough to offset the decline in new auto loans, resulting in total auto loan balances slipping 1.6% from the previous June.

One of the driving factors currently impacting credit union auto lending trends is the state of the overall consumer market. Oil prices have remained high in 2008. Last week’s drip below $100 per barrel marked the first close below that mark in more than 5 months, and consumer trends are adjusting accordingly. We continue to see significant shifts toward lower priced vehicles and more fuel efficient vehicles. Part of the increase in used auto lending is due to this shift. As of June, the average used auto loan balance was $9,831, more than $5,000 below the average value of a new auto loan. In the current market, this lower loan amount becomes much more attractive to the average consumer, thus partly explaining the shift credit unions are seeing toward used auto lending.

Credit Unions Capture Additional Market Share

Credit unions are not the only lenders that are seeing declining balances due to these external market trends, but they may be faring better than other auto lenders. In contrast to the falling auto loan balances experienced thus far in 2008, overall credit union market share has continued to rise. As of July, credit unions capture 15.8% of the total auto loan market. This marks the most robust data point in a series of strong jumps in credit union market share. Not only did July’s numbers reach an 18-month high for credit union market share, but also an increase of nearly three full percentage points over the last four months.

On a year-to-date basis, credit union market share stands at 14.2% after the first seven months of the year. Despite strong growth in recent months, this is still below the 14.9% year-to-date market share captured during the first seven months of 2007. This lower level is caused by sharp drops in market share experienced during the first few months of the year, ending in a 12.9% market share in March, a five-year low.

With credit union market share continuing to rise despite falling total balances, this shows that the external market may be having a more serious impact on other lending competitors. Although total auto loan levels have declined, increasing market share provides the necessary context to show that credit unions remain key players in this market and are in a strong position to attract business from other lenders that may have stepped back from the market.

 

 

 

Sept. 22, 2008


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