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Cloudy forecast for credit union auto lending in 2020

by Credit Union Journal | Feb 06, 2020

Despite total annual sales topping 17 million for the last several years, auto lending across the country is on the decline, meaning a key credit union revenue driver is slowing down too.

Last year saw a 1.6% year-over-year decline in total auto sales, according to automotive research firm Edmunds, and credit union growth in that sector slowed significantly. The latest Credit Union Trends Report from CUNA Mutual Group shows year-over-year growth stood at just 2.7% as of November, the most recent data available, down precipitously from 10.5% in November 2018 and 11.6% year-over-year in November 2017.

The slowdown is expected to continue into 2020 and beyond. The National Automobile Dealers Association is predicting new auto sales of 16.8 million for 2020, a 1.2% drop from 2019 sales volumes, while Cox Automotive forecasts a 1.5% tumble for the used car side. Growth in new auto loans was flat for credit unions as of November, a stark change from double-digit year-over-year growth during each of the previous two years. Used car figures were still up by 4.5% at CUs, but that’s less than half of where growth rates stood in November 2018.

Still, used car sales are expected to remain strong for credit unions, with 20.3 million units expected to be sold nationwide this year, or growth of about 1.5%.

Market share shrinking
The industry must also worry about decreasing market share. At the close of Q3, credit unions had 19.5% market share for new and used auto lending, down from 22.6% in Q3 2018, according to Experian.

Bob Child, COO at CU Direct, suggested that drop is partly due to credit unions pulling back on auto lending amid fears about a potential recession and rising delinquencies. Other lenders, including Capital One, have suggested falling prices on used cars could pose major risks for auto lenders. Still, credit unions continue to hold more than 28% of the market for used cars, a drop of just 1 point from Q3 ’18, while new car market share fell nearly 3 points to 11.7%.

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