Experian data shows that borrowers in the first quarter took out car loans for higher amounts, longer terms and less often from credit unions.
Credit unions originated 20% of the number of loans in the three months ending March 31, down from 20.8% for all of 2020, 21.9% in 2019 and a peak of 24.5% in 2018. Banks, captives and other lenders increased their share from 2020 to the first quarter.
Experian’s report reinforces data released earlier this month by the Fed and CUNA showing auto loan portfolios grew only 0.4% to $383 billion at credit unions in the 12 months ending March 31, but grew 6.1% to $847 billion at other lenders.
As a result, credit unions’ 31% portfolio share in March was down from 32.2% in March 2020, 31.5% in December 2020 and its all-time peak of 32.6% in December 2018.
Melinda Zabritski, Experian’s senior director of automotive financial solutions, presented Experian’s first quarter “State of the Automotive Finance Market” report in a Thursday webinar, measuring credit unions against other lenders by several measures.
Zabritski said she did not have an explanation for credit union’s declining shares since 2018, which she called “the year of the credit union.” However, she said when banks were on the retreat three years ago, executives said the pullback was intentional.
Melinda ZabritskiThe overall picture of the first-quarter market is one where loans were rising as sales continued to recover. Borrowers across the board had healthier credit scores, resulting in smaller portions of lending in the subprime and non-prime segments, where scores are 660 or lower.
Many prime borrowers had shifted to the used car market starting in 2019 because of high prices and shortages for new cars they wanted. That led to higher prices on used cars.
Cox Automotive reported Thursday that average list prices for used cars in April were about $22,568, up 16% from a year earlier and up 15% from two years earlier.
The rolling 30-day rate of used vehicle sales has been about 2 million to 2.1 million in April, surpassing sales levels for the same weeks of 2019. By April 26, sales were 92% greater than a year earlier and 6% greater than the same week of 2019.
The average manufacturer’s suggested retail price (MSRP) for new cars was $41,950 in April, up 8% from September.
Experian found 43.2% of loans and leases were for new cars in the first quarter, up from 40.9% for all of 2020.
“We’re starting to see those prime consumers moving back to new cars,” she said.
Credit unions aren’t getting as much of the love as other lenders.
Captives increased their first-quarter originations 23.9%, while they fell 1.39% for credit unions, 0.98 for banks and 5.61% for finance companies and others. That follows a 12.5% drop for credit unions from 2019 to 2020.
Credit unions had their highest shares of loans and leases in the first quarter in the West (23.4%) and Midwest (20.6%), and their lowest shares in the South (16.1%) and Northeast (12.2).
Credit unions have a slightly higher proportion of prime borrowers than banks, and significantly more than captive lenders. Borrowers with scores of 661 and up accounted for 74.4% of first-quarter originations at credit unions, up from 70.6% in both the first quarters of 2020 and 2019.
Prime borrowers rose similarly at banks, but fell 68.84% in 2020 to 67.59% in 2021 at captives. At captives, prime borrowers fell nearly a percentage point to 67.6% in the first quarter.
The 60-day-plus delinquency rate for all lenders was 0.53% as of April 25, down from about 0.70% to 0.75% two years ago and 0.85% to 0.90% a year ago.
The average amount financed for new cars by credit unions was $38,387 in the first quarter, up from $37,016 last year and $34,537 in 2019. Average payments rose from $555 in 2019, to $575 in 2020 to $591 in the first quarter.
On new cars, 73- to 84-month terms accounted for 32.3% of new car loans in the first quarter, up from 30.8% last year and 30.5% in 2019. Terms greater than 84 months were 2.5% of loans in the first quarter, up from 2.2% in 2020 and 1.4% in 2019.
On used cars, 73- to 84-month terms accounted for 23.4% of loans in the first quarter, up from 19.8% in 2020 and 18.9% in 2019. Terms over 84 months were 0.7% of used car loans in the first quarter, up from 0.4% in 2020 and 2019.
Terms tend to be longer at credit unions.
Terms of 73 to 84 months accounted for 26.4% of used car loans at credit unions in the first quarter, up from 24.1% in 2020 and 21.7% in 2019. Terms over 84 months were 1.2%, up from 0.8% in 2020 and 2019.
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