Rate and term: How credit unions are winning market share | Auto Finance News Rate and term: How credit unions are winning market share | Auto Finance News
Auto Finance News

No products in the cart.

Subscribe
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • EXCELLENCE
    • Best Practices
    • Columns
      • Strategy Upshift: Georg Bauer
      • Under The Hood: Marcie Belles
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Data
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • EXCELLENCE
    • Best Practices
    • Columns
      • Strategy Upshift: Georg Bauer
      • Under The Hood: Marcie Belles
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Data
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
No Result
View All Result

Rate and term: How credit unions are winning market share

Longer loan terms, competitive rates boost originations

Joey Pizzolato by Joey Pizzolato
July 29, 2022
in Features
Reading Time: 4 mins read
0

In the latest chapter of the market ebbs and flows spurred by COVID-19 shutdowns that began over two years ago, credit unions (CU) are now offering longer loan terms and more attractive rates to drive originations, and they’re claiming a larger share of auto loans in the process, on the heels of the steepest rise in benchmark interest rates since the 1980s and soaring vehicle prices.

Payment-conscious consumers are responding as new-vehicle manufacturer suggested retail price (MSRP) increase and used-vehicle values remain elevated, Thomas King, chief product officer and president of JD Power’s data and analytics division, said last week at the Origence Lending Tech Live conference in Aurora, Colo. “Very competitive rates [are] driving success” at credit unions, he said.

Simply put, CUs are taking a much larger slice of the proverbial pie, though that pie has gotten smaller in a limited-inventory environment, Brian Hamilton, president of Origence Lending Services, told Auto Finance News.

“Why have credit unions continued to not just do ok, but thrive in this market where fewer cars are being made?” Hamilton said. “It really ties to the fact that, although the pie is much smaller, we’re taking a much bigger slice — we’re taking from the captives and the traditional financial institutions.

“That really has to do with the 84-month terms and the great rates we have,” Hamilton said. “Affordability continues to be a challenge, especially when [car] prices are higher.”

In fact, credit unions in Q2 were offering an average interest rate of 3.2% on new-vehicle loans with terms of 72 months to borrowers with a FICO of 740-plus, according to JD Power data. That’s 130 basis points (bps) lower than the average interest charged by banks, and 70 bps lower than the rate charged by captives.

By comparison, credit union rates in Q2 2019 clocked in at 4.1%, 1 bps higher than the captives’ offering and 6 bps lower than banks’ average rate, according to JD Power.

Longer terms fuel sales

CUs are also offering longer term loans to help offset the rising cost of vehicles in both the new and used markets, another driver of increased market share, King said. Longer-term loans have long been a key lever that lenders have pulled to combat affordability concerns.

CU share of new-vehicle loans with terms 84 months and longer clocked in at 49% in the second quarter, up from 37% in Q2 2019, according to JD Power.

“They’re catching almost half of all 84-month loans on new vehicles,” King said, noting that captives haven’t been aggressive in the space since the summer of 2020, when 84-month, 0% APR incentives were rampant to help fuel vehicle sales after initial COVID shutdowns.

“They want to keep folks coming back” and buying vehicles, King said.

CUs command a majority share of long-term loans in the used market, too, according to JD Power data. In fact, CUs held 65% share of 84-month loans for used vehicles at franchised dealerships in Q2, up from 58% in Q2 2019.

To be sure, only 6% of loans in Ford Credit’s $76.8 billion consumer portfolio had terms 84-months or longer, according to the captive’s earnings supplement.

By the numbers

The 1,146 CUs that use Origence’s origination platform funded a record of 1.3 million loans through the first six months of the year, a 23% year-over-year increase accounting for $39.5 billion in auto originations, Tony Boutelle, president and chief executive of lending solutions provider CU Direct, now Origence, said last week during the Origence Lending Tech Live ’22 conference in Aurora, Colo.

Over three-quarters of that volume was made up of auto loans, Boutelle said. This accounts for $29.6 billion in auto loan production, according to an AFN analysis. A large majority of those —76% — were for used vehicles.

“To give you some indication of how big that number is, [in 2021] for the whole year, we did $57 billion,” Boutelle said, whereas  Origence originated $44 billion in loans and leases through its platform in 2020, a 29.5% increase.

“This says that we’re on track for $78 million,” Boutelle said.

In aggregate, CUs on Origence’s platform were the largest auto lenders by volume through May, according to AutoCount data, originating 610,815 loans and leases nationwide, a 20.8% YoY increase.

Looking closer, a similar story is playing out across states with the largest auto finance volume. In California, the largest state for auto financing, SchoolsFirst Federal Credit Union was the No. 10 largest auto lender with 5,413 loan and lease contracts financed, a 26.6% sequential increase and up 60.2% YoY.

In Florida — the second-largest state for auto financing — Suncoast FCU landed at the No. 5 spot, producing 4,927 auto loans and leases, a 21.4% YoY gain, and Space Coast FCU increased its auto production 123.4% YoY to 4,927 contracts, landing the Melbourne, Fla.-based CU as the No. 8 largest auto lender in the state.

Banks pull back, again

After reclaiming market share a year ago, banks have started to pull back again on auto lending on a sequential basis as yields tighten and the Federal Reserve’s benchmark interest rate range now sits at  2.25% to 2.5%, representing a combined 150-basis point jump in June and July. Chase Auto, for one, saw a 3.8% quarter-over-quarter decrease in its auto portfolio, PNC Financial’s auto book dropped 4.4% sequentially, and Citizens logged a 4% sequential decline.

Still, it remains to be seen if CUs will be able to carry the same momentum through the remaining six months of the year, Origence’s Boutelle said.

“The next six months are going to be a little iffy as far as rates go and how the market plays out,” Boutelle said. “I think there’s still going to be a big demand for cars, so we’re going to [originate loans], but maybe not quite as many as in the first six months.”

Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 26-28 at the Wynn Las Vegas. To learn more about the 2022 event and register, visit www.AutoFinanceSummit.com.  

Tags: auto originationsCredit Unionsmarket sharePremium
Previous Post

Polaris’ incentive spend and finance revenue ticks down in Q2

Next Post

Embracing change: Powersports lenders go full throttle at new opportunities

Related Posts

Features

Filling the gaps: 4 ways to improve DEI in auto finance

February 3, 2023
Features

Beyond the metrics: The new age of DEI in auto finance

January 31, 2023
Features

Revitalizing subscriptions: How EVs are changing car ownership 

December 22, 2022
Next Post

Embracing change: Powersports lenders go full throttle at new opportunities

STAY INFORMED WITH OUR NEWS ALERTS

COLUMNS

Auto fintech investments slump in 2022

January 24, 2023
© Can Stock Photo / welcomia

Under the Hood: EV adoption threatens residual values

December 20, 2022

INNOVATION & TECHNOLOGY

© 2019 Bloomberg Finance LP

Capital One doubles down on digital with Navigator Platform

February 3, 2023
via Santander Consumer USA website

SCUSA, AutoFi prep national rollout of direct-to-consumer marketplace

February 1, 2023

RISK MANAGEMENT

Equipment Financers remain optimistic despite recession talks

Equipment Financers remain optimistic despite recession talks

February 3, 2023
An employee works inside the kitchen at a hotel in New York.

US payrolls surprise with surge as jobless rate hits 53-year low

February 3, 2023

SPONSORED

© Can Stock Photo / Ajlber

Q&A with CCC Intelligent Solutions VP of Lender Services Rick Evans

December 7, 2022

Your SaaS, Covered: Risk Decisioning through Economic Uncertainty

June 8, 2022
Drive a better consumer experience in auto financing with instant decisioning

Drive a better consumer experience in auto financing with instant decisioning

May 9, 2022

About

ABOUT US

PRIVACY TERMS

ADA COMPLIANCE

CODE OF JOURNALISM ETHICS

Manage Cookie Consent

Contact Us

ADVERTISE

HELP CENTER

Follow Us

twitter linkedin podcast
© 2023 Royal Media
No Result
View All Result
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • Excellence
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
  • Data
  • +PLUS
  • SUBSCRIBE
  • Log In / Account

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Powered By MemberPress WooCommerce Plus Integration
THIS WEBSITE USES COOKIES

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “I CONSENT”, you consent to the use of ALL the cookies.

Cookie settingsI CONSENT

Review our Cookie Policies
.
Manage Cookie Consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
34f6831605sessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
a64cedc0bfsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
cookielawinfo-checkbox-advertisement1 yearSet by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
crmcsrsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
JSESSIONIDsessionThe JSESSIONID cookie is used by New Relic to store a session identifier so that New Relic can monitor session counts for an application.
LS_CSRF_TOKENsessionCloudflare sets this cookie to track users’ activities across multiple websites. It expires once the browser is closed.
LSKey-c$CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
CookieDurationDescription
__cf_bm30 minutesThis cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
_zcsr_tmpsessionZoho sets this cookie for the login function on the website.
663a60c55dsessionThis cookie is related to Zoho (Customer Service) Chatbox
e188bc05fesessionThis cookie is set in relation to Zoho Campaigns
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThe _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gid1 dayInstalled by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
CONSENT2 yearsYouTube sets this cookie via embedded youtube-videos and registers anonymous statistical data.
vuid2 yearsVimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
__Host-GAPS2 yearsThis cookie allows the website to identify a user and provide enhanced functionality and personalisation.
_dc_gtm_UA-1038974-31 minuteUsed to help identify the visitors by either age, gender, or interests by DoubleClick - Google Tag Manager.
_fbp3 monthsThis cookie is set by Facebook to display advertisements when either on Facebook or on a digital platform powered by Facebook advertising, after visiting the website.
fr3 monthsFacebook sets this cookie to show relevant advertisements to users by tracking user behaviour across the web, on sites that have Facebook pixel or Facebook social plugin.
test_cookie15 minutesThe test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysA cookie set by YouTube to measure bandwidth that determines whether the user gets the new or old player interface.
YSCsessionYSC cookie is set by Youtube and is used to track the views of embedded videos on Youtube pages.
yt-remote-connected-devicesneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt-remote-device-idneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt.innertube::nextIdneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
yt.innertube::requestsneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
caf_ipaddrsessionNo description available.
citysessionNo description available.
countrysessionNo description available.
gnt_eidsessionNo description available.
gnt_eu6 hoursNo description
iamcsrsessionZoho (Customer Support) sets this cookie and is used for tracking visitors (for performance purposes)
systemsessionNo description available.
traffic_targetsessionNo description available.
Save & Accept
Powered by CookieYes Logo