CU Direct's network ranks third, again, in auto-loan originations

Jerry Neemann: “More cars are being sold, so it is great time [for credit unions] to be in the auto-lending arena.”

Credit unions on CU Direct’s lending network originated a record 1.06 million auto loans in 2015, a 13 percent rise from 2014, CU Direct said last week, citing data from Experian.

For the second straight year, the CUDL network was the third biggest lender based on auto loan originations. The network trailed Ally Financial, with 1.19 million originations, and Wells Fargo Dealer Services, with 1.14 million.

The CUDL platform, which links 1,100 credit unions and 12,000 dealerships, “keeps getting bigger and stronger” as there has been a sharper “focus on credit unions within automotive lending,” Jerry Neemann, CU Direct’s executive vice president of automotive solutions, told Automotive News.

Credit unions as a whole, both inside and outside the CUDL network, are the second-largest auto lending type after banks, with 20 percent of the market during the third quarter, CU Direct data show.

One in four

In the third quarter, credit unions as a group originated about one in every four U.S. auto loans, and they are continuing to focus on lending to prime borrowers.

Credit unions originated 24 percent of auto loans in the third quarter, a significant but relatively flat share compared with the year earlier. The outstanding auto loan balance for all credit unions reached $257.9 billion in the third quarter, up 15 percent from a year earlier, CU Direct said, citing Callahan & Associates data.

“More cars are being sold, so it is great time [for credit unions] to be in the auto-lending arena,” Neemann said.

Credit unions aim to balance their overall lending portfolios, Neemann said. Auto loans are reliable parts of the mix because often after the loan term ends, customers come back to trade in their vehicles and purchase and finance others. And because a vehicle is a collateralized asset, it’s more protected than, say, a credit card, he said.

Stable auto portfolios

Auto loans held steady in credit unions’ third-quarter portfolios, making up 44 percent of outstanding loan balances at all credit unions, as vehicle sales increased and credit unions actively engaged in auto lending strategies, Neemann said.

He said credit unions have been successful in part because they, like dealers, are local. The credit union is a lending source that will buy paper, but it may also send its members to buy vehicles from a local dealership, with financing arranged through the credit union, he said.

Half of all credit unions’ auto loans go to prime borrowers, while 17 percent goes to super prime borrowers, CU Direct said. About a quarter of credit unions’ auto loan borrowers fall into the near-prime segment, and only 10 percent are subprime borrowers.

“Subprime lending is not something a credit union really deals with,” Neemann said. Credit unions don’t have the subprime expertise, he added.

But credit unions still aim to diversify their portfolios with prime and nonprime borrowers, he said, just without the subprime risk.

You can reach Hannah Lutz at -- Follow Hannah on Twitter: @hm_lutz

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