Whether to purchase a vehicle and how to finance it are key questions most people ask at some point in their lives. A significant portion of purchased vehicles are financed through loans or leases; in the third quarter of 2020, 82% of new vehicle purchases and 34% of used vehicle purchases were financed. For credit unions, vehicle financing through auto loans not only makes up a significant fraction of loan portfolios but financing also helps credit unions improve members’ transportation options, attract new members, and form lasting, meaningful member relationships.
What is this research about?
This research reviews recent trends in auto lending and how COVID-19 has affected the market. From these data, we present short and long-term projections, and identify next steps credit unions can take to prepare for a future where auto loans and related services can continue to advance member well-being and diversify credit union loan portfolios.
What are the credit union implications?
Despite the short-term disruption of COVID-19, we expect auto loans to remain a significant component of credit union loan portfolios over the medium term and for the foreseeable future.
However, longer term projections are particularly clouded as auto demand could fall substantially, and unexpectedly, as future generations shift away from auto ownership in favor of public transportation and ridesharing. Credit unions must continue to shift their loan portfolios to accommodate member demand, and future demand may offer a diminished focus on car ownership.