Credit unions in CU Direct’s lending network as a group reaped more growth in originations during the first quarter than any individual bank or captive among the top 10 auto lenders, CU Direct said in its State of the Credit Union Auto Lending Market presentation on Tuesday.
CU Direct was the third-largest auto lender through March, behind Wells Fargo Dealer Services in the top spot and Ally Financial in second, according to Experian data.
Credit unions on CU Direct’s network originated 251,996 loans in the first quarter, a 16 percent increase versus the first three months of 2015.
After CU Direct, Chase Auto Finance, ranked fourth, reported the most significant rise in originations at 8.8 percent, slightly more than half the growth of CU Direct. Five of the top 10 lenders’ originations declined from the first three months of 2015.
Credit Unions are “addressing exactly what the market is saying. 2015 was a record [sales] year,” said Jose Torres senior business analyst for CU Direct. “More credit unions are more active and more engaged on the indirect lending side than previously [because] if they are not active on the indirect side, they are missing out on that loan.”
CU Direct’s CUDL platform links 1,100 credit unions and 12,700 dealerships nationwide. Credit unions as a whole, both inside and outside the CUDL network, are the second-largest type of auto lender after banks, with 21 percent of the market through March, CU Direct and Experian data show.
Credit unions are “not only competing but getting their fair share of the auto lending activity going on,” Torres said.
Long loan terms
Through April, 55.9 percent of new-vehicle loans originated through the CU Direct network had terms of 73 to 84 months, Torres said. The 73- to 84-month segment grew from 55.4 percent in the year-earlier period.
The average loan term for new vehicles financed by credit unions in CU Direct’s network through April was on the shorter end of the 73-to-84-month segment at 74 months, flat compared with the first four months of 2015. For used vehicles, the average was 68 months, an increase of one month year over year. Industrywide, the average new-vehicle loan term is 67 months.
One advantage of a long term is affordability, Torres said. “Consumers don’t look at the price of the automobile. They look at ‘What is my payment?’” Torres said.
Industrywide, despite a trend toward longer terms, delinquencies have ticked up only slightly, data from Experian Automotive show. The average 60-day delinquency rate for banks, captives, finance companies and credit unions combined in the fourth quarter of 2015 was 0.77 percent, up from 0.72 percent in the 2014 quarter.
Fastest growing segment
Auto loans make up a third of all credit unions’ portfolio, falling behind first mortgages, at 41 percent. But auto lending is credit unions’ fastest-growing segment. In 2015 auto loan balances grew 14 percent versus 2014, according to Callahan Associates.
From 2010 to 2015, indirect auto lending through CU Direct’s network almost doubled, rising from $70.2 billion to $137.3 billion, CU Direct said, citing data from Callahan & Associates. “We can say that the true engagement of indirect lending has happened from 2010 to 2015,” Torres said.