If you want to succeed in the business of any kind, you will need to meet the demands of the customers. It applies to the auto lending market as well. However, in order to meet with the demands successfully, you will need to know about the demands first along with its type and size. This will enable you to design the products accordingly that will satisfy the consumers in the best way possible.
This applies to both the new car market as well as the used car market, which now has a very strong demand. Ideally, it is the growing demand for the used car that has enabled the auto lenders to make larger lending gains. However, the picture may not be as rosy as it seems. This is because there may be a few specific economic issues just around the corner.
Therefore, measuring the auto loan market is of prime importance for all lenders to do well in their business.
When you look at the business growth graph of the credit unions you will see that:
- They have grown their share of the auto loan market by mid-year but however, this growth rate is slowing down and is also showing a few signs of several of them already are starting to pull back slowly but surely.
- You will also see that in the last 18 months the credit unions have also started to recapture some of their lost profitability and it all started with the first Fed rate increase in December 2015.
It is due to this factor that the margins of the credit unions have remained thin. It is for this reason that the lending executives, industry observers, and critics caution the auto lenders about a few changes and shifts that are bound to happen such as:
- The economic shit
- The technological shift as well as
- The demographic shifts.
In fact, these shifts have already started to show the warning signals to all players, major and minor, offline or online such as https://www.nationaldebtrelief.com/ or others in the auto financing market.
Measuring the car loan market
If you simply take a look at the US auto lending market you will see that there is a significant growth in the credit union auto loan sector but that has slowed in 2019.
- Statistically, total car loans offered by the credit unions grew by 5.3% to $376.6 billion
- Last year it had grown by 10.5% and
- The share of the credit unions of the automotive loans was 32.1% in June 2018.
However, the share of auto loans of the credit union is down from 32.3% in last December.
Looking at the used car market
Even after all these changes, the credit unions dealing with auto loans still have the power and position to maintain a robust presence in the market, especially in the used car market which is expected to grow this year and even in 2020.
- The experts say that the used car auto loan market will make up to 70% of their entire auto loan portfolios.
- They even go a step further and believe that this trend will continue all through the next year and beyond.
- The credit unions at present are holding a steady position as far as the auto loan delinquencies are concerned but the experts believe that it is just for now.
According to the National Credit Union Administration reports, it is seen that the auto loan industry had a comfortable 66 basis in the year 2018, as far as the average delinquency rate is concerned. However, the NCUA data shows that the indirect auto loan delinquencies have come to a low 54 points through the first quarter of 2019.
When you look at the broader segment of the auto loan market you will see that it has already started showing some warning signals. The Federal Reserve Bank of New York reported that:
- At the end of 2018 there was a record high of more than 7 million Americans who were delinquent on their auto loans by 90 or more. This is in fact 1 million more than the borrowers in the previous report of 2010 year end.
- The report also shows that this is a trend that has actually started building slowly since 2014 and thereafter this upward trend in more than 90days auto loan delinquencies continued into the first quarter of this year.
Most of the auto loan industry experts consider this to be the most worrying signs for the credit unions and warn them that their auto lending experience in the recent years will be far more bitter as far as the near-term possibilities are concerned. They are of the opinion that: Bigger the auto loans are, harder it will be for the credit unions to manage the effect when they fall.
Auto loan performance
At present, according to the industry experts, the auto loan industry is at present riding close to its six-year high. This is now really in a strong position where the borrowers are paying their car loans diligently and historically well.
Most importantly, the used car values now have been a very strong and the current trend of used car loans provided by the credit unions has also contributed to the strength as well as the performance of the auto loan market as well as its products.However, the trend also shows that historically when there is a long period of strong credit performance, there will be a specific point in time that it will change, often for the worse.
- There are several reasons for such downfall but the most significant one is the rising pressure on the credit unions to increase profitability.
- Another reason is that the credit unions have failed to keep up with the pace with the increase rate of the Fed since late 2015.
With all these facts and figures known to you now, it is now high time after a decrease in the rate to widen your market but you should not rush to gain lower rates to gain profit and increase your risks.