LAS VEGAS—One credit union ranks second among all lenders in the nation for making auto loans above $80,000.
According to Experian, $9.8-billion Alliant CU in Chicago made more loans last year for luxury cars whose price tag approached $100,000 than all but one lender.
That interesting fact was pointed out by Karl Kruppa, senior automotive solutions consultant for Experian, during CU Direct’s Drive ’17 Conference here.
Kruppa told attendees that the CU’s data shows that virtually all of Alliant’s auto loans above $80,000 are for Teslas.
Kruppa said that overall Experian’s auto lending data show loans above $80,000, while a small segment, are growing. “Tesla is responsible for this,” he said.
Kruppa acknowledged that he was “shocked” to see a credit union at the top of the lender list for luxury car loans.
“You would think it would be all banks like Chase, looking for big ticket, wealthy customers to cross sell,” said Kruppa.
That was one of several interesting facts Kruppa said indicate credit unions are becoming more powerful players in the auto lending market, taking their share to near record levels.
Kruppa emphasized too, that what he is seeing from credit unions today combined with a pullback by banks in subprime, is positioning credit unions well for future growth in auto lending.
Credit unions, through January 2017 data, now claim slightly above 20% of the entire auto lending market.
“And if you look at the trend line, in the last several years credit union share has just continued to rise,” said Kruppa.
Kruppa pointed out that Experian data shows that in almost every state CU share is increasing year over year, a sign that what is happening is not being buoyed by specific markets.
“And in Utah, 63% of all auto loans made are by credit unions,” said Kruppa. He noted that one of the largest increases for CUs annually came from California last year, which posted 19.4% year-over-year growth in CU lending.
“The Pacific Northwest is also particularly strong for credit unions, while the Southeast is the weakest,” he said.
Kruppa said that credit unions’ strength in auto lending is loans for older cars, which they write more of than any other lender. He said that 21.26% of all CU loans are made by the top 20 credit union lenders—Navy FCU, America First CU, Security Service FCU, State Employees’ CU (North Carolina), and Golden 1 CU are the top five, respectively.
As experts have been noting in the last year, subprime auto lending delinquencies are rising.
“We are seeing the subprime loan now behaving more like subprime,” said Kruppa, referring to the fact that following the recession subprime loan delinquencies remained stable, inviting large banks, primarily to dig deeper into these borrowers.
“We are now seeing increases in the riskier categories,” said Kruppa.
First quarter 2017 data shows that deep subprime delinquencies stand at 3.76%, up from 3.45% a year earlier.
“There has been only a slight increase (year over year) in subprime delinquencies among credit unions,” Kruppa said.
Subprime has been a big contributor to overall auto loan balance growth, with the exception of CU portfolios.
As experts at Drive ’17 stated, the fact that credit unions have not relied on subprime lending to grow their auto loan portfolios positions them well to expand market share as banks now pull back on riskier lending.
What also is a good sign for credit unions, as well as for banks, is that the captives don’t claim the lion’s share of the business in their respective automaker lanes. For example, Kruppa noted that one of the biggest carmakers, Chevrolet, only claimed 13% of all Chevy new car loans last year through its financing arm, Ford accounted for 44% of loans for Ford purchases.
“So to say that he manufacturers claim all the business is not accurate,” said Kruppa. “They don’t get all the business.”