Outstanding automotive loan balances in the U.S. set another record in this year’s second quarter, reaching $1.1 trillion, up from $1.027 trillion at the same time last year, according to credit tracker Experian.
Credit unions saw the highest rate of growth. That lending segment has actively pursued more auto-loan business in recent years, and the effort is paying off.
“They’ve really picked up quite a bit of share across the finance market,” Melinda Zabritski, a senior director in Experian’s automotive unit, says of credit unions. “They’ve seen double digit growth in the last several years.”
With total new- and used-car loan balances of $295 billion in the second quarter compared with $258 billion at the same time last year, credit unions now hold the No.2 spot in the automotive lending market.
They rank behind banks (which had $366 billion of open auto loans) and in front of automakers’ captive financing units ($252 billion) and finance companies ($187 billion).
Many dealerships have developed mutually beneficial working relationships with credit unions. But some dealership finance and insurance managers accuse certain credit unions of trying to cut them out, snag business and deal directly with dealership customers.
Meanwhile, banks complain credit unions have an unfair advantage when it comes to government regulations.
Although all segments saw quarterly gains year over year in auto lending, the growth rate has slowed down somewhat. Zabritski attributes that in part to an increase in vehicle leasing. “About one in three cars that leave a dealer lot today are leased,” she says.
Experian says most loan balances remain at prime and higher levels. High risk segments, including subprime (501 to 600 credit-score range) and deep subprime (300 to 500), are below 20%.
Some industry analysts have worried lately about the possibility of a subprime bubble. But most auto-lending players and observers say that’s highly unlikely, given the nature of the loan spread.
The total loan market remains near record lows for subprime. Deep subprime is at an all-time low since the second quarter of 2012.
Lending to consumers with prime credit scores (ranging from 661 to 780) makes up the largest segment (41.97%) of automotive lending, Experian reports.
Other highlights of its latest automotive finance market report:
- 30-day delinquencies dropped year-over-year.
- 60-day delinquencies grew slightly.
- Prime and super prime consumers opting for used vehicles set a record.
- Monthly new-vehicle payments reached a record high of $504. The average monthly loan on a used car is $365.
- Longer loan terms continue to dominate the market, with the average length of new-car financing approaching 69 months. It’s nearly 64 months for used- car financing.
- The average new- and used-vehicle loan is $30,234 and $19,189, respectively.