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 RANCHO CUCAMONGA, Calif. — Although down from a record 19.3 percent in 2005,
credit unions maintained a strong market share in 2006, originating 18 percent
of auto loans, according to CU Direct Corp.'s inaugural Auto Lending Business
Intelligence Report.
According to CUDL, credit union members have the lowest average monthly payments
and financed smaller amounts on new vehicles for the year, when compared to
consumers who financed vehicles through a captive or bank.
More specifically, credit union members had an average monthly new-vehicle
payment of $389 and financed a median $17,645 last year. As for consumers who
went through captives, they financed an average of $20,442, with a median
monthly payment of $422, executives reported.
Similar to the trend with financial institutions, CUDL found that credit union
members' average loan maturity level is also growing. The company said more than
two-thirds of credit union members financed their vehicle loans for longer than
five years.
Indirect loans were by far the most popular avenue for consumers turning to
credit unions for financing, officials highlighted. A total of 39.4 percent of
all outstanding loans were financed via this avenue last year.
"More impressive is the fact that the report reveals 80 percent of all net auto
loan growth between December 2005 and December 2006 came through indirect
lending channels," executives explained.
"Credit unions are seeking new and innovative ways to generate more auto loans
and gain better returns on their repossessed vehicles," officials pointed out.
"Through aggregation, credit unions are developing stronger relationships with
dealers and increasing auto loans originated through indirect channels.
"Credit unions are also using online channels to help their members research
vehicles and find the best financing," they continued. "On the remarketing side,
credit unions are partnering with third parties to gain better returns on
repossessed vehicles."
In 2006, CUDL found that 567 credit unions in 46 states originated $13.7 billion
in auto loans via the company's platform. According to officials, this statistic
means that CUDL is the nation's sixth largest auto lender.
In 2005, CUDL platform originations were a record 680,266, totaling $14.8
billion.
"This trend mirrors the rest of the auto industry," CUDL pointed out in its
report. "Total auto originations were down 2.9 percent from 2005."
Last year, CUDL said credit unions partnered with 8,267 dealers to fund loans.
Each credit union worked with an average of 83 dealers.
Executives went on to highlight that in four states, credit unions served as the
top lenders, with California taking the top market by originating the most loans
in 2006 — 2 million, holding 22 percent of the market.
Other states making the list included: Utah's America First FCU, which
originated 32,384 auto loans, holding 16.8 percent of the market; Oregon's
OnPoint Community FCU by originating 21,092 auto loans, with 6.8 percent of the
market; Washington's BECU, with 44,085 auto loans originated and 10.4 percent of
the market; and finally, Alaska's USA FCU, which originated 15,117 auto loans,
with 28.6 percent of the market.
"When it comes to vehicle brands selected by CUDL credit union members, General
Motors was at the top of the list. While Toyota overtook Chrysler in 2006 to
rank third in U.S. vehicle sales, Chrysler still remained the third most popular
brand among CUDL union members," executives noted.
Applications Submitted
Of the almost 2 million applications submitted on the CUDL platform last year,
officials said more than one-third, or 33.4 percent, resulted in funded loans.
Moreover, executives said more than half of the funded loans were approved on
the CUDL system directly, while the remaining loans required manual entry and
"further due diligence by credit union staff."
"Based on data from the Consumer Banker's Association, this rate was around the
same for large banks, but much lower than what captives were reporting,"
executives explained. "Large banks funded 33 percent of the applications
submitted to them, while captives funded 60 percent."
As a percentage of applications, 30 percent of used-vehicle applications were
approved, while 38.5 percent of new-vehicle applications were approved by credit
unions, CUDL said.
In a breakdown by new and used vehicles, CUDL said credit union members
requested an average of $25,585 for a new-vehicle loan, and $18,154 for a
used-vehicle loan.
"This correlates with the fact that the most popular new vehicles funded on the
CUDL platform in 2006 were mid-sized sedans, such as the Toyota Camry, and
smaller vehicles like the Honda Civic," executives said.
When it comes to used-vehicle loans, CUDL discovered that 41.2 percent of all
these units were funded for loans amounts less than $15,000.
Credit Score Breakdown
The average credit score for CUDL credit union members in 2006 was 718. More
specifically, the median score of a member applying for a new-car loan was 728,
while for those applying for a used-car loan, it was 711.
"Nearly two-thirds of all vehicle loans (66.1 percent) went to members with
prime credit," executives reported.
They said this trend was comparable to average credit scores being funded
through other avenues. For example, according to CBA, the average score for new-
and used-vehicle loans financed through indirect bank programs was 716.
Moreover, CBA said nearly 75 percent of these loans went to customers with
credit scores of 680 or higher.
As for interest rates, CUDL said credit unions tended to charge an average of 7
percent on new-vehicle loans and 7.9 percent on used-vehicle loans.
"When Experian compiled average interest rates charged by all financial
institutions, it found that credit unions had the lowest average interest rates
when compared to other financial institutions," officials said. "On average,
credit unions offered auto loans at a full percentage point lower than their
nearest competitor, banks."
Nonprime Lending
According to CUDL, more than one-third, or 33.9 percent, of all loans funded on
its platform last year was for members with nonprime or subprime credit levels.
"On average, there was a 2.1 percentage point different between the interest
rate charged on new-vehicle prime and nonprime loans, and a 1.8 percentage point
difference between the rate charged on used-vehicle prime and nonprime loans,"
executives explained.
To learn more about the report and obtain a copy, visit
www.cudl.com, or contact Joe James at (909)
481-2337, or e-mail him at
joe.james@cudl.com.
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