Credit Unions Increasingly Look to Indirect Channel for Auto Loans

U.S. credit unions now face more competition than ever for auto loans. Although vehicle loans still make up about 39% of the average credit union's lending portfolio, fewer loans are now being funded for new vehicles. Many credit unions have turned to indirect lending as a way of maintaining market share by leveraging auto dealers' highly influential role in the loan selection process.

 
 

U.S. credit unions now face more competition than ever for auto loans. Although vehicle loans still make up about 39% of the average credit union's lending portfolio, fewer loans are now being funded for new vehicles. Many credit unions have turned to indirect lending as a way of maintaining market share by leveraging auto dealers' highly influential role in the loan selection process.

Seventy eight percent of credit unions responding to a recent Callahan & Associates survey indicated that they either currently use indirect lending, or expect to launch a program by the end of 2003. This represents a 7% increase compared to mid-year 2002, when two-thirds of credit unions responding to a similar Callahan's survey said that they participated in indirect lending.

The increase is not unexpected, given both the intense level of competition for loans at the dealership and the excess liquidity present in the market. Participation will probably continue to increase as long as one or both of these factors are present.

 

 

 

June 2, 2003


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