CUDL Reports on Credit Union Performance
RANCHO CUCAMONGA, Calif. — According to the recently released 2008 Auto Lending Business Intelligence Report from CU Direct Corp., credit unions' performance in the auto lending sector in 2007 was on par with those of banks and other lenders.
A major reason for this success could be that credit unions were able to offer competitive financing rates to their members versus other institutions, the report indicated.
Breaking it down, officials noted that credit unions accounted for 16.9 percent of all auto loans originating in 2007, down slightly from 18 percent in 2006.
However, this dip was consistent with banks, whose market share declined to 32.6 percent from 34.2 percent on the year.
Captives, meanwhile, fell slightly from 25.3 percent to 25.2 percent market share on the year.
According to the report, the only sector to increase in market share was finance companies, which saw its share grow to 25.3 percent from 22.5 percent the year before.
Essentially, to grow loan volume, credit unions turned to lower rates and flexible loan terms, the report stated.
Meanwhile, other institutions were more apt to utilize non-prime and subprime lending to increase their loan volume, the report explained.
Moreover, almost half of the loans that finance companies originated last year were subprime.
"Auto lending continues to be the one area where credit unions held a significant market share," explained Joe James, CUDL's market research analyst. "In fact, there are five states where an individual credit union is the top lender in the entire state."
These states include Alaska, Colorado, Oregon, Utah and Washington, officials stated.
Additionally, CUDL suggested that credit unions showed efficient risk management with regards to auto lending portfolios.
Granted, credit union indirect delinquencies and charge-offs inclined in 2007, the report indicated. But the rates were still essentially even with delinquency and charge-off rates on other consumer loans provided by credit unions.
At 1.2 percent, delinquency rates on indirect loans practically mirrored delinquency rates on other consumer loans, which were at 1.3 percent.
The report also discussed average loan maturities for credit unions.
According to officials, average loans maturities on new-vehicle loans funded in 2007 by credit unions on the CUDL platform, and average maturities for used-vehicle loans were quite different in comparison to their respective 2006 figures.
In 2007, the average new-vehicle loan maturity was 72 months versus 65 months the previous year. Also, 69.3 percent of new-vehicle loans had maturities of more than five years.
In a time where consumers prefer to decrease monthly payments, this type of extension on auto loans has typically been "standard for all financial institutions," the report explained.
Used-vehicle loans, meanwhile, decreased in average maturity from 70 months to 65 months in 2007.
Initially, it may appear that the reason for this decrease could be because of a drop in the average amount of the loans, analysts noted.
But, the report debunked this theory as the average used-vehicle loan amount was $18,199 in 2007, basically remaining static from $18,154 in 2006.
Rather, the report suggested, the fall in loan maturity could be attributed to better rates from CUDL credit unions.
Furthermore, citing J.D. Power and Associates data, CUDL indicated that used-vehicle loan maturity is a "reflection of market trends," as 82 percent of all auto loans originated in 2007 showed maturities between 60 months and 77.9 months.
Moving on, credits unions increased loan portfolios through various vehicle channels as the RV, watercraft and motorcycle markets.
According to officials, credit unions funded more than 10,000 loans through these channels in 2007, with average loan amounts between $6,830 (all-terrain vehicles) to $25,039 (boat).
"Although we saw a decline in credit union market share from 2006 to 2007, a reflection of the current downturn in the auto industry, credit unions have maintained a strong presence in the auto lending arena," stated Tony Boutelle, president and chief executive officer of CUDL.
"Credit unions have used new channels such as the Internet to grow auto loans, but they have also used traditional channels to stay competitive," Boutelle added.
For more information, visit www.cudl.com.