Shifting Gears on Car Loans

By John Flynn, CEO, Open Lending

Overall, auto lending is slowing, but that doesn’t have to be the case for your credit union!

Credit union car loans grew 5.8% in May, according to a report in CU Times. However, between January and May new car balances were down 1.1% compared to a 4.1% gain during the same period last year. Used cars at credit unions were up just 2% in the same time period versus a 5.3% increase the year before.

As the trend toward SUVs and the potential for increased tariffs will affect affordability, we see opportunities shifting for credit unions. The first prospect is the near prime market. According to data from the CFPB, superprime auto lending has been skyrocketing over the last five years, while prime and near prime have seen declines. Near prime is always a sweet spot for auto loan revenue, balancing risk and reward. Open Lending’s Lenders Protection can help your credit union pinpoint the right opportunities in this demographic to make safe bets and make your auto loan portfolio work harder for you and help members at the same time.

Click here to learn more about Open Lending’s Lenders Protection.

In part, the issue is declining demand for new vehicles, so we also see used vehicles as a prime opportunity for credit unions. We aren’t the only ones, based on a report from The Financial Brand. Open Lending uses alternative credit data, such as LexisNexis scores that includes utility payments and other information, to create a more wholistic credit profile of potential borrowers to help your credit union identify your best opportunities. Years of following trends have taught us what to look for and delivered excellent returns – 300% to 400% higher net ROAs over their prime portfolios – for hundreds of clients.

Refinancing existing auto loans is another great choice in the current environment. As the consumer website, ValuePenguin states, credit unions tend to have the best rates, and with the drastic rise in auto lending over the past few years, opportunities abound. We work with Ser Tech to identify and deliver the best loan offers to the right members at the right time.

Credit unions serve as members’ trusted advisors, so take advantage of that position to educate members about credit scores, how they affect borrowing and how to improve their scores. Help credit-challenged members out with a loan when they need it or a lower rate to save money on an existing loan, and assisting members to improve their credit scores, and you’ll earn a loyal member for life who refers their friends and family, too!