Credit unions funded 19.2% of all U.S. auto loans in 2017, registering an industry-leading 13.5% one-year market-share gain.  Photo courtesy Architectural Polymers via Flickr

Credit unions funded 19.2% of all U.S. auto loans in 2017, registering an industry-leading 13.5% one-year market-share gain. Photo courtesy Architectural Polymers via Flickr

Consumer interest in quality used cars — including older, higher-mileage models — will continue strong through 2018. In addition, the increase of off-lease vehicles will give buyers more choices across more price points than the industry has seen in some time.

This increased off-lease volume may bring with it declining used car values, which means dealers will look to:

• Laser-focus on vehicle acquisition cost and quality.

• Increase sales margins by reconditioning cars faster, so they get to the sold line quicker.

• Competitive price to market to gain buyer attention.

• Leverage credit unions with a long history of helping dealers increase used auto sales.

Credit unions have become a very valuable partner for dealers, providing excellent locations to go to get paper bought, and an additional channel of comparative lending.

A dealer working with local credit unions has a true advantage — a flexible finance option that will help drive used cars sales. Dealers like using credit unions for both new- and used-car purchases, because credit unions understand their members and consumer loan flexibility, as well as having better rates than most other lenders.

Marketplace Strength

Consistently, 70% of credit union auto loan portfolios are used cars, reflecting the used-car finance market strength of these lenders. The credit union member is a good prospect. With more than 5,600 credit unions nationwide, representing more than 110 million credit union members, one in three Americans — and half of all employed Americans, are credit union members. This is a dynamic market segment increasingly pursued by auto dealers, which is why auto loan originations by the nation’s credit unions are setting a record pace.

Recent auto loan data continue to confirm the robust position credit unions enjoy. Credit unions held 19.2% of the vehicle finance market share, according to Callahan & Associates, and as a whole experienced almost 12% loan growth through year-end 2017, leading all lender types.

Dealers engaging credit union members recognize these buyers’ affinity to their local communities — and their credit union’s endorsement of local businesses, including auto dealers.

It’s partly because of this synergy that auto dealers who work with credit unions to originate auto loans enjoy significant market advantages. These lenders provide greater loan flexibility for consumers to buy more vehicle than they might otherwise. These consumers typically purchase one or more aftermarket products, such as a vehicle service contract, GAP, or prepaid maintenance to protect their vehicle investment and budget.

CU Direct’s 1,100 credit unions became the nation’s leading auto lender in 2017, with 16.2% loan growth year-end, the second-highest loan-origination growth rate among the top 10 lenders in the country, according to data from AutoCount. Through February of 2018, we’ve seen this trend continue, as credit unions on the CUDL platform have maintained their No. 1 position in the marketplace, experiencing 13.5% year-over-year growth.

Credit unions on my company’s platform funded 1.8 million loans last year, generating a record $39 billion in credit union auto loans, surpassing the company’s record $32 billion in loans funded in 2016. There is recognized value in using lending technology that opens the door for dealers to work with and expedite loans through credit unions, for which market growth has come, in part, from the market pullback by some banks and other finance sources.

What This Means for Dealers

Auto lending is one of the cores of what credit unions do, and they continue to be aggressive in expanding their auto portfolios because their collective relationship with dealerships is as good as it’s ever been.

As a result, credit unions are seizing the opportunity in auto lending, and we don’t anticipate that tapering off. When it comes to retail auto lending, credit unions are the only finance sector that has exhibited growth and grown portfolios.

For dealers to effectively tap into the growing consumer interest in purchasing used cars to increase sales, gain new customers, and build brand loyalty, collaborating with credit unions makes good business sense.

Bob Child is the COO at CU Direct and a 25-year industry veteran. Contact him at [email protected] or (877) 744-2835.