Credit Unions Gain Larger Share of Auto Loans as Banks Lose Momentum

Source: American Banker

A surge in auto lending in the second quarter has given U.S. credit unions their biggest slice of the vehicle lending pie in the past five years. 

Recent data from the National Credit Union Administration showed that auto loans increased $58.7 billion, or 15.1% year over year, to $447.6 billion. Used-auto loans rose $43.2 billion, or 17.4%, to $291.0 billion, and new-auto loans rose $15.5 billion, or 11.0%, to $156.5 billion.

Experian's State of the Automotive Finance Market report for the second quarter of 2022 shows that credit unions now have their highest total share of the auto lending market since 2017, at nearly 26%. A year ago that figure was just above 18%.

The secret to their success is offering low rates and underpricing the market, said John Toohig, head of whole loan trading at Raymond James.

"We're in this really weird spot right now where [credit unions] have a lot of cash on hand and they've been using it to make loans at ultra-low rates," Toohig said. "We're still seeing them make 1%, 2% or 3% auto loans whereas the rest of the market is at 5.5% or 6.5%."