By Ray Birch
WASHINGTON— Credit union auto lenders might have a reason to look ahead to the holidays with cautious optimism. After a sluggish year for vehicle financing, a combination of falling interest rates, pent-up demand, and renewed consumer confidence could spark a year-end rebound in loan activity, analysts are forecasting.
According to the NCUA’s latest system performance data, total credit union vehicle loans fell by $6.5 billion, or 1.3%, in the second quarter of 2025, slipping to $483.5 billion. The decline marks one of the steepest quarterly drops in auto lending since the pandemic era, underscoring how higher borrowing costs and fierce competition from captive lenders have squeezed credit-union portfolios.
But recent signals from both the Federal Reserve and auto-market trackers suggest a turnaround could be coming.
Laura Wehunt, vice president of data and analytics at Black Book, said the September auto market showed notable energy, particularly among buyers racing to purchase before the September 30 expiration of federal hybrid and electric-vehicle tax credits.
“New vehicle sales were strong, fueled by consumers eager to purchase hybrid and electric vehicles ahead of the September 30 federal tax credit expiration,” Wehunt noted. “Dealers had hoped the Fed’s rate cut would spur more activity, but with the announcement of two additional cuts planned for 2025, many consumers appear to be holding off on purchases, slowing retail demand.”
That “pause” may set up an unusual dynamic for the fourth quarter: strong consumer intent but deferred action. In other words, the auto market may be poised for a post-Thanksgiving surge once the next Fed cut materializes and promotional financing kicks in.
Edmunds: ‘A Sentiment Shift Could Be Enough’
Joseph Yun, consumer analyst at Edmunds, told CUToday.info that while the expected rate cuts—perhaps totaling 50 to 75 basis points by year-end—may not dramatically lower monthly payments, they could meaningfully change consumer psychology.
“Even if average auto rates fall from 7% to around 6.25%, that small decline can have an outsized impact on sentiment,” Yun said. “For months, buyers have been waiting for some sign that rates are finally coming down. That relief alone can spur sales, especially if lenders—like credit unions or OEM financing arms—decide to get more aggressive with promotional offers.”
Extending promotional rates to 72-month terms or offering targeted incentives, Yun added, could help credit unions recapture borrowers they lost to captive lenders earlier this year.
Yun emphasized that 2025’s slowdown in credit-union auto lending wasn’t primarily due to member delinquency or credit risk, but competition.
“Captive lenders have been more aggressive,” he explained. “They’ve had more margin to play with and stronger incentives to keep customers in their ecosystem.”
With the Fed signaling more rate cuts, he said, credit unions have an opportunity to respond in kind—reaching “a little deeper” for qualified borrowers and using their community relationships to win back share.
“Typically, people prioritize their car payments,” Yun noted. “That’s why being ready to move quickly, with flexible programs, is key heading into the holidays.”
Positioning For A Strong Close To 2025
Industry analysts agree that a rebound in vehicle lending would be a welcome lift for credit unions whose balance sheets have leaned heavily on slower-growing consumer segments this year. Seasonal promotions—especially around Black Friday and year-end clearance events—could align perfectly with renewed rate optimism and consumer readiness to spend, Yun said.
Whether it turns into a “big holiday loan season” remains to be seen. But for credit unions hoping to reverse recent declines in auto portfolios, Yun said the message from market data is clear: momentum is building—and those who prepare now could be the biggest beneficiaries when it breaks.