The Return Of The Auto Portfolio

A surge in car sales helped credit unions grow auto loans in 2013.

Credit unions are gearing up for an exciting 2014 lending has returned and so has the auto market. Year-end figures are not yet available, but trends from 2013 show an industryon track to post the strongest year for auto sales since 2007. Expectations for 2014 are bright, with industry experts predicting even higher overall auto sales.

According to a December 2013 article in Automotive News, light-vehicle auto sales in 2013were forecasted to reach 15.6 million. That’s an 8.0% gain over 2012. Looking ahead to 2014, sales are expected to surge past 16 million for the first time since 2007. According to the chief economist for the National Automobile Dealers Association,sales in 2014 will be sustainable and profitable. That is a needed relief from the incentive wars of the past few years in which dealers have ratcheted up discounts and sacrificed profitability in an attempt to capture sales.

Outstanding auto loan balances at credit unions are up significantly over the past 12 months, with new auto loans up 11.3% and used auto loans up 9.6%. After several years of stagnantand negative growth in the auto portfolio, auto loans have rebounded and were among the fastest growing segments in the loan portfolio in 2013.

New auto loans, which make up 10.9% of the loan portfolio, grew by $7.1 billion annually to reach $69.6 billion. Used auto loans, the second-largest component of the loan portfolio at 19.8%, added $11.1 billion to outstanding balances. They totaled $126.2billion as of Sept. 30, 2013.

DATA AS OF SEPT. 30, 2013
Callahan & Associates |

Source: Callahan & Associates’Peer-to-Peer Analytics

A total of 6,523 credit unions, or 96.6% of the industry, had at least one auto loan outstanding in the third quarter. That’s up slightly from last year.

As of Sept. 30, credit unions held 15,993,260 outstanding auto loans. Auto loan penetration divides the number of auto loans by the number of members to approximate a percentage of members with an auto loan. Auto loan penetration for the industry stoodat 16.5%, up from 16.0% last September. Auto loan penetration declined during the recession but has started to climb as members replace older cars.

DATA AS OF SEPT. 30, 2013
Callahan & Associates |

Source: Callahan & Associates’Peer-to-Peer Analytics

In addition to rising outstanding auto balances, the average auto loan balance has also increased over the past year to $12,244 as of Sept. 30. This is up 4.5% from one year ago. The rise in average balance is the result of new auto loans growing fasterthan used auto loans. New auto loans tend to have higher average balances than used auto loans, which drives up the overall average auto loan balance.

DATA AS OF SEPT. 30, 2013
Callahan & Associates |


Source: Callahan & Associates’Peer-to-Peer Analytics

Auto lending has picked up across the country. As such, the credit union share of the auto market was down slightly from year-to-date September 2012 levels. Through September, credit unions captured 14.7% of auto loans nationally, down from 15.2% in September2012.

The pickup in auto and consumer lending comes at a time of uncertainty in the mortgage market. With strong auto sales expected to continue and consumers feeling more confident with each passing month, consumer loans should help the overall loan portfolioride out any bumps as we enter 2014.

July 8, 2014

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