After at least six years of steady growth, auto loan balances at banks fell in the third quarter compared with the same period a year ago as credit union loan balances continued to grow, according to Experian.
Banks’ auto loan balances decreased to $369 billion, down $1 billion from the year-ago quarter, according to Experian's latest “State of the Automotive Finance Market” report. The drop marks the first time bank balances have declined year over year since at least 2011, when Experian started tracking the data, said Melinda Zabritski, the company’s senior director of automotive financial solutions.
“We have seen the growth slow down, but up until now, there was still an increase,” said Zabritski. “This is really the first quarter that we have seen balances really decrease since coming out of the recession.”
Much of the decline likely resulted from deliberate actions by some banks to rebalance their portfolios, she said.
“In the past year, year and a half or so, we have seen some very strategic decisions made by quite a few lenders to reshuffle and reprioritize some of their lending,” Zabritski said.
Some banks were much heavier in auto than in other segments, which drove them to dial back on auto to create a more balanced portfolio. “That has cumulatively affected bank exposure with balance and market share,” Zabritski said.
While banks posted lower balances and share, credit unions continued to gain footing.
Credit union auto loan balances rose $37 billion, or 12 percent, to $342 billion.
Loan balances at credit unions have increased by double-digit percentages since 2013, Zabritski said.
Market share among credit unions also increased, rising to 22.6 percent of the total auto finance origination market, compared with 21 percent the year earlier.
As interest rates rise, Zabritski expects the share of the market held by banks to continue to dwindle as credit union share grows over the next several quarters.
Banks’ share fell to 31 percent in the third quarter, compared with 32.9 percent the year earlier. Market share was essentially flat for captives and finance companies. Captives increased their auto loan balances by 2.7 percent, while finance company balances expanded by 5 percent.