Credit union auto-loan portfolios have seen an annual growth for the first time in more than six years, with their auto lending practices jumping to 5% from 2.3% last year, says CUNA Mutual Group’s September Credit Union Trends Report.
In addition, credit unions’ new-vehicle portfolios saw year-over-year growth for the first time in five years. The data showed that, in each of the past five months, new-car loans increased, but remained $30.1 billion (or 33%) under their peak in 2007, while used-car portfolios progressed to $7.4 billion (or 7%).
The data also showed that car loans now make up 29.2% of all loan activity at credit unions.
“Reports from credit union lenders across the country indicate improving demand for all vehicle loans,” said CUNA Mutual Chief Economist Dave Colby in the analysis. “The question remains: Is this just a temporary release of replacement demand or is it sustainable, provided the economy doesn’t falter?”
I think this is great news for the credit union industry. Being able to put out their excess deposits means more to their bottom line. Most if not all of this business has come from prime consumers and members. Credit unions that have a moderate tolerance for risk could even grow more vehicle loans if they were to implement an “other than prime” program. The sad fact is that many former prime members have reclassified to “other than prime” as a result of a FICO score drop. Not because they are no longer prime, buttheir FICO says they are because they have gone through more difficult economic times and maybe had a mortgage mod that drops their FICO. Now credit unions can no longer service their former prime members.
Credit Unions have more time to provide “underwriting” beyond FICO on their customers. While they might not have really good underwriters, they do have the ability to understand the customer better and perhaps the employers better. Assuming the rates offered are competitive, it would be wiser for the average person to deal with a credit union than with some of major banks. National polls show that the major banks are “untrustworthy” and for good reason based on the actions by a few “bad apple big banks” that operate under the credo “Caveat Emptor”. these are banks that offer short – term small dollar loans at 200-365% interest. I can imagine a mega-bank loan collector at Wells Fargo or US Bank pushing that on a delinquent customer just to collect a payment.