Credit Unions Gaining Auto Loan Share in Shrinking Market Posted by AVCU on 7:53 AM

 Credit unions improved their market share of the nation’s automotive financing in the third quarter, with a strong gain in new car loans, according to an Experian report released Thursday.

However, credit unions are building share in a shrinking market. Cox Automotive made the unusual move Thursday of lowering its monthly new car sales forecast only three days after its release. It said it now expects new cars were sold at a seasonally adjusted rate of 13 million vehicles per year in November, down from Monday’s forecast of 13.4 million SAAR for the month.

That puts new car sales on the same pace as October, and down from 15.9 million SAAR in November 2020.

“Based on our data and reports from the industry, it’s clear that November auto sales were well below year-ago levels. Sales in November were similar to October – slow,” Cox Automotive said in an online website update.

“The chip shortage continues to constrain new-vehicle availability, and this November was no exception, Cox Automotive said.

“The inventory crisis is going to be with us well into 2021,” Cox Automotive said. “A broad, market-wide breakout to a higher level of sales seems highly unlikely until the global supply chain for chips, and other parts, improves significantly.

Independent economist Elliot Eisenberg said Thursday that shortages of chips for cars and other key goods might be easing, but the improvement is likely to be slow.

“It looks like automobile manufacturers have weathered the worst of this crisis.”

On the omicron variant of the COVID-19 virus, Eisenberg said it appears to present a lesser threat to the economy.

Speaking during a webinar sponsored by Origence, a division of CU Direct of Irvine, Calif., Eisenberg said early indications are that the omicron variant might spread more quickly, but doesn’t appear to be more likely to cause deaths.

Eisenberg said the economy has recovered from setbacks from other variants faster than the initial wave, and is likely to recover from setbacks caused by this variant as well, unless evidence emerges that it is deadlier.

“We’re learning to live with these things,” he said.

Eisenberg also referred to the gain in credit union market share shown in the Experian report.

Experian’s “State of the Automotive Finance Market“ report for the third quarter showed both credit unions and banks making gains at the expense of captive lenders.

Credit unions generated 20.2% of total auto loans and leases during the three months ending Sept. 30, up from 18.2% in the second quarter, 17.2% in the first quarter and 19.3% in November 2020. It was also higher than the pre-pandemic share of 19.6% in 2019’s third quarter.

For new-car financing, credit unions generated 12.7% of loans and leases, up from 11.2% in the second quarter, 10.1% in the first quarter and 10.9% a year ago. Credit unions’ new car share was 11.6% in 2019’s third quarter, and fell to a low of 9.5% in 2020’s second quarter as the worst of the pandemic’s economic impact occurred.

For used car financing the gain was small from a year ago, but also showed recovery from the first half. Credit unions generated 25.5% of used car loans, up from 24% in the second quarter and 25.4% a year ago.

Credit unions lost share when the auto market rebounded from the summer of 2020 through the spring of this year.

CUNA Senior Economist Dawit Kebede said in a video presentation last week that credit unions need to be concerned both by their drop in auto loan market share in 2020 and early 2021, and an aging membership.

Kebede cited Fed data that shows the average age of a credit union member in 2001 was 44, compared with about 51 for a bank customer. The latest data showed the average ages were 51 for credit union members and 52 for bank customers in 2019.

“In 2001, credit unions had an advantage over banks with a younger demographic, but now that gap is closing,” he said.

While young people are a key segment for credit unions, Kebede said many are being lost to internet applications that allow not only car purchases, but also financing, to be completed online.

“Credit unions need to develop strategies to boost market share and attract younger members,” he said.