CUDL: Credit Unions Held 18% of ’06 Auto Loans
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.