5 Trends in Auto Lending to Give Credit Unions Hope

I watch the automobile lending market very closely for obvious reasons. There are so many moving parts, and I know as a former credit union CEO, lenders may not be able to keep up on all of them. I’ll hit the highlights of what I’m seeing right now in car loans.

1. We’ve all noticed vehicle sales beginning to slow in the overall market, a 1.1% decline year over year, Auto Finance News reported, and with it goes lending. Look for enhanced dealer incentives to help prop up sales. That said, credit unions’ share of the nonrevolving credit market increased to 14% as of April 2019, up from 13.7% a year prior, according to CUNA data. Used autos were up 0.7% in April over March, and new car loans increased 0.2% in the same time period.
   
2. And we’ve all read reports that auto loan delinquencies have reached the highest rate in 19 years, but credit unions’ overall delinquencies are holding steady. According to statistics from the NCUA, credit union loan delinquencies have been holding steady, even slightly down at 0.53% as of March 2019. If you’re looking to grow solid car loans even more – new or used, direct or indirect, prime or near-prime – you’ve come to the right place. Contact Open Lending to learn more about Lenders Protection today!
   
3. American consumers are really intrigued with SUVs and crossover vehicles, so average pricing has been pushed to a record high $37,000, AFN said. However, you should think twice before making an eight-year car loans even as your competitors are offering them; that vehicle will remain underwater longer, decreasing your return. We like to keep terms to about 72 months on the long end.
   
4. New competitors with more efficient business models that are built on consumer-centricity are entering the market at a fast clip. LendingClub is getting into the auto finance market, according to a report in Forbes. Here’s a snippet of what a LendingClub executive had to say about why they entered auto lending: “We entered the auto loan refinancing space quite simply because we knew we could deliver meaningful value for our customers and our investors. The majority of people coming to us are dealing with APRs above 17% — and many even over 21% — and they have a substantial length of time remaining on their term. We also recognized that auto financing was an industry where we could disrupt age-old practices and differentiate the customer experience – streamlining the loan process and eliminating friction points that have historically inhibited borrowers’ ability to easily refinance their high-rate auto loan.” Your credit union can use your tech partners to be more consumer-centric and compete with behemoths like LendingClub. Take advantage of our agreement with ILT’s Allegro Lending Suite indirect lending platform to capture more market share while protecting your assets for indirect loans. We also partner with Ser Tech, a credit decisioning firm offering marketing services among others, because we know community-based financial institutions can serve their neighbors better than any fintech app. Did you realize that fewer than half of Americans realize they can refinance their car loan?! That’s precisely what a recent Harris Poll found, according to NerdWallet. Ser Tech has a highly effective auto loan recapture program.
   
5. Jump on the we’re-in-this-together opportunity with consumers. The megabanks are still earning their trust back after the economic collapse. Wells Fargo is the gift that keeps on giving for scrupulous lenders; American Banker reports they’re staring down a $385 million settlement on a car insurance scandal, plus billions more in other legal issues. Bank on trust in your auto loan marketing messaging.