This week, CreditUnions.com turns its focus toward the auto portfolio. We ask: How can credit unions recapture auto loan growth? What lifeline can the industry provide underwater borrowers? What is the state of the portfolio, generally?
Here are five can't-miss data points:
Pen Air Federal Credit Union has captured the loyalty of thousands of members in the three years since it rolled out an auto finance recapture program that knocks up to 2 percentage points off loans brought in from another lender. The program began in mid-2016 and is highlighted twice a year with marketing campaigns that use internal data to identify loans held elsewhere that might be attracted instead to the Panhandle cooperative.
Read: Pen Air Recaptures Its Way To Auto Loan Growth
With prices at the dealership on the rise, America’s outstanding auto loan debt reached $1.14 trillion in Q3 2018, up 63% from 2010, with the average monthly payment for new cars hitting $531. These pricing pressures are fueling longer loan terms, and a growing number of borrowers are going underwater on their loans or moving to leasing contracts they can ill afford. To provide relief from crushing debt, Opportunities Credit Union began offering its WOW Auto Loan in mid-2017. Under the program, Opportunities members can borrow up to $30,000 for a 2010 or newer vehicle, with only 70% of the loan secured by the value of the vehicle.
Read: How Opportunities Credit Union Throws A Lifeline To Underwater Borrowers
Total auto loans at credit unions expanded 10.1% year-over-year, the fastest of any major loan product, and added $34.0 billion to the industry’s total loan portfolio in 2018. By year-end, auto loan balances totaled $369.8 billion, with $220.9 billion, or 59.7%, coming from used auto loans and $148.9 billion, or 40.3%, coming from new.
Read: Credit Unions Excel At Meeting Members' Auto Loan Needs
34 Basis Points
Annual growth in auto loans was the fastest of any major loan product at U.S. credit unions, and the segment accounted for $369.8 billion in total balances at year-end 2018. The share of the credit union loan portfolio held in auto loans increased 34 basis points year-over-year to 35.0% as of Dec. 31, 2018. Since year-end 2017, credit unions have gone from financing 19.7% of auto loans on the market to 20.5%. By the end of 2018, one in five credit union members, or 21.2%, held an auto loan with their cooperative. That’s an increase of 74 basis points year-over-year.
Read: 6 Graphs About Credit Union Auto Lending
When Kemba Credit Union’s one underwriter for indirect auto loan applications left in 2015, the organization’s leaders saw the opportunity to adopt a more robust automated decisioning strategy. As part of the institution's decisioning engine, the credit union has crafted a set of 20-40 if/then rules to make better decisions overall.
Read: The Search For The 'Fat Middle'