SAN DIEGO–Over-extension on used vehicle loans is the number-one concern for credit unions in the 2023 auto finance market, according to Credit Union Leasing of America’s (CULA) Q2 2023 Credit Union Used Vehicle Loan Snapshot.
Nevertheless, the findings in the online survey of CU lenders indicate credit unions continue to offer car buyers a significant percentage of longer-term loans, with low down payments, on high mileage older vehicles – and the majority are extending LTV by over 125%, CULA reported.
“It was no surprise to us that over-extension on used vehicle loans is generating significant worry for credit unions, as is overall used vehicle affordability, but the results also uncovered a troubling disconnect: credit unions continue to offer car buyers a significant percentage of longer-term loans, with low down payments, on high mileage older vehicles and increased LTV,” Mark Chandler, VP of business development for CULA, said in a statement.
Terms Out to 72 Months
According to CULA, 70% of the credit union respondents said their longest-term loans are 72 months or more, and the majority will lend $75,000 or more on a used vehicle, with nearly one-third saying they would lend $100,000 or more.
Meanwhile, CULA said it found 76% report a mileage limit on their used vehicle loans of 75,000 miles or more, with 30% extending that limit to 100,000 miles or more. The majority say they require a 10% or less down payment on used vehicle loans. Only 14% ask for more than 20%, the company added.
What Results Make Clear
“As these survey results make clear, credit unions will continue to incur unnecessary risk if they don’t find an alternative to the long-term used auto loan, which they are continuing to offer in significant numbers – and on vehicles that present potential risk,” continued Chandler.
CULA further said the results also confirm that the majority (52%) of credit unions’ used vehicle auto finance customers are most interested in long term loans of seven years or more.
“But nearly half (48%) are most interested in short term loans – the usage of a newer vehicle for a low payment,” CULA said in releasing its findings. “This almost even split is probably due to high used vehicle prices: consumers are either looking for the lower payments of a long-term loan or the lower commitment of a short-term loan.”
A Better Answer
“The vast majority of credit unions in this survey agree that they would like a better alternative, such as short-term financing with affordable payments and higher yield. Vehicle leasing, which checks all of these boxes, might just be the answer credit unions are seeking,” Chandler said.
Key Takeaways
According to CULA, key takeaways in the survey include:
- 64% of credit union respondents cited over-extension on used loans as their biggest concern about the 2023 auto finance landscape, followed by skyrocketing vehicle prices.
- Auto finance consumers today, say respondents, are almost evenly split in interest between long-term (52%) and short term (48%) loans.
- At least one-in-four used vehicle loans are 72 to 84 months for the vast majority (78%) of credit union respondents.
- 72% of credit union respondents say their longest-term loans are 72 months or more, with 28% saying that 84-month loans are their longest term.
- Of those credit unions reporting that 84 months are their longest-term loans, 55% say those make up one in five or more of their loans, with nearly a third saying that they make up over 40% of loans.
- 58% of credit union respondents require a 10% or less down payment on used vehicle loans.
- 55% of credit union respondents say they will extend LTV on used vehicle loans by 125% or more.
- 76% of credit union respondents have a mileage limit on their used vehicles of 75,000 miles or more, with 30% extending that limit to 100,000 miles or more.
- 71% of credit union respondents will lend $75K or more on a used vehicle, with nearly one-third (31%) saying they would lend $100,000 or more.
How to Get Report
For additional information on CULA’s “Q2 2023 Credit Union Used Vehicle Loan Snapshot,” click here.
It’s Called Fresh for a Reason. And We Offer Home Delivery. For Free!
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com