Credit unions on CU Direct’s lending network as a group reaped higher auto-loan origination growth in the first half of this year than any other auto lender ranked among the nation’s top 10, CU Direct said last week during its State of the Credit Union Auto Lending Market presentation.
The CU Direct network was the third-largest U.S. auto lender through June, behind top-ranking Wells Fargo Dealer Services and No. 2 Ally Financial, according to data from Experian’s AutoCount unit.
As a whole, the top 10 lenders’ auto origination volume declined 0.2 percent from Jan. 1 to June 30, 2016. But the CU Direct network’s volume grew a chart-topping 16.4 percent, to 529,003 loans. Chase Auto Finance, ranked fifth on the top 10 list, had the second-highest gain, at 8.3 percent, while Santander Consumer Finance, ranked 10th, posted the most drastic decline, down 19.3 percent.
Five of the top 10 auto lenders reported fewer originations through June, with three falling by double-digit levels. The tallies do not include leases and private-party transactions.
CU Direct’s CUDL platform links 1,100 credit unions and 12,700 dealerships nationwide. After banks, credit unions as a whole, both inside and outside the CUDL network, are the second-largest auto lender type, accounting for 21 percent of the market through June, CU Direct and AutoCount data show.
In June, CU Direct’s network grew its auto origination volume 17.6 percent, while new-vehicle sales increased just 2.5 percent and used-vehicle sales rose 6.1 percent.
Credit unions, inside and outside the network, originated $36.8 billion in auto loans in the first quarter, up 9.7 percent year over year. Credit unions as a whole accounted for 25 percent of the total auto-origination volume in the quarter, flat compared with the 2015 period.
Bill Meyer, spokesman for CU Direct, told Automotive News that over the past several years, credit unions in the network have remained strong. “There’s been a steady growth and build through the indirect channel to provide financing to not only [credit union] members” but also to dealership customers overall to grow their lending base, he said.
Jose Torres, senior business analyst for CU Direct, added: “It’s a commitment [credit unions] have had over the years that’s leading to a continuous performance, just for them being there in the [economic] downturn and upturn. [Credit unions are] capitalizing on that [relationship] with dealers.”
Ninety percent of CU Direct’s auto loans are financed through dealerships, Torres said. Auto loans made up more than a third of all credit unions’ portfolios in the first quarter at $272.4 billion, a year-over-year climb of 14 percent.
In the next year, Torres said, credit unions’ auto originations will again increase but possibly at a slower pace as the rate of growth for new-vehicle sales slows. But credit unions will find strength in their used-vehicle financing business, he added. Seven out of 10 auto loans funded by CU Direct’s credit unions are for used vehicles, he said.
The average new-vehicle loan term for credit unions on CU Direct’s network was unchanged through June at 74 months. Used-vehicle loan terms increased 1 month to 68 months.
More than half of CU Direct’s new-vehicle loan portfolio had terms of 73 to 84 months, though borrowers who receive 84-month loans are typically prime customers, Torres said.
Millennials drive growth
Overall, credit unions have grown at a faster rate than other lenders, and millennials are a key driver, TransUnion said earlier this month.
Credit union membership in the first quarter grew more than three times as fast as the credit activity among banks or other finance companies. A quarter of credit union members in the first quarter were millennials, compared with only a fifth in 2013.