Lending Perspectives: Have credit unions reached peak growth for auto loans?

The answer lies in trends in manufacturer financing, banking, demographics and electric vehicles.

For the last several decades, auto loans have been a big part of loan portfolio growth for most credit unions. As an industry we’ve gotten better at indirect lending—learning from our mistakes on risk management to become major players.

Credit unions also picked up a lot of momentum directly after the financial crisis. We’re depository lenders and we had money to lend. The financial markets were so dysfunctional that the manufacturers’ financing arms could not originate and securitize loans profitably, so credit unions stepped in to keep auto sales afloat in early 2009. Now almost 13 years later, what momentum do credit unions still have when it comes to growing our loan portfolios through auto lending?

The Manufacturers Are Roaring Back

COVID-19 has impacted the supply of new autos, which started affecting portfolio growth last year. Between 2014 and 2019, Ent Credit Union’s worst year for Indirect auto loan growth saw 16% growth. In 2020, we failed to reach 4%. In 2021, Ent likely won’t see 2% growth. The manufacturers and their financing arms have recaptured a lot of the business we’ve feasted on since 2009. Cheap money makes it that much easier to offer 0% financing.


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