Credit Unions Look To Capitalize on Car Market

Credit Unions Look To Capitalize on Car Market

Credit unions have a strong presence in the auto financing market, but the automobile market has been volatile since the COVID-19 outbreak. It has been changing and evolving every month. While the industry is beginning to see the benefits of a gradual recovery, the market is still turbulent. 

The car industry is still dealing with microchip scarcity and the resulting inventory issues, but consumer financing habits are beginning to normalize following the shortage of 2020. According to Experian's second quarter of 2021 State of the Automotive Loan Market study, the gap between new and used automobile financing has begun to narrow.

Simultaneously, the average loan amount for a used vehicle climbed by $1,600 in the fourth quarter of 2020 to $22,467. In the meantime, the average monthly payment for a used loan has risen to $413, up from $395 last year. We can expect used car prices to continue to rise as availability remains tight. Nonetheless, used vehicles are likely to remain a more affordable alternative for many buyers when compared to new vehicles.

While a lower percentage of consumers financed automobiles in the fourth quarter of 2020, it's important to note that used cars are still a popular choice for many car buyers. And, with credit unions possessing the second largest market share for used vehicles, there is still space for expansion in this sector – especially as affordability becomes more of an issue.

The COVID-19 outbreak frequently drove people to buy automobiles online rather than at a dealership, which means the loan is more likely to be held by third-party lenders. Because consumer behavior changed, a shortage of inventory has caused credit unions to make fewer car loans.

Auto lending can still be a lucrative line of business for credit unions. They can position themselves as the go-to resource for consumers looking for an auto loan by combining a digital-first procedure, but the model is changing, and credit unions must adapt.

The automobile industry has demonstrated its resiliency and ability to adapt to every crisis over the years. Credit unions can ride this wave and gain market share in the foreseeable future by utilizing increased data sources and identifying new audiences.