Published by the Credit Union Association of New York

featurestory
In New York, auto lending opportunities
continue to grow
By Ray Birch, Guest Contributor
NEW CAR SALES ARE COMING BACK, BUT CREDIT UNION AUTO
lending is not keeping pace with the increase, according to
national statistics.
However, that’s not the case in the Empire State.
New York credit unions (2.41 percent) easily outpaced
the national credit union auto loan growth average (.32
percent) in 2011, and this year CU Direct Corp. reports that
credit union auto loan portfolios in New York are on track
with the rise in new car sales.
“Nationally, auto sales continue to increase. I have seen
reports around 20 percent year-over-year growth,” says Bob
Nealon, regional VP of CU Direct Corp. “Credit unions in
New York that are using CU Direct are reporting increases
in auto loan volume relative to the
pick-up in new car sales.”
The opportunity is there, and
even more will come, notes Bill
Hampel, CUNA’s chief economist
and SVP of research and policy
analysis. He projects that annual new
car sales should reach 14.5 to 15
million units in the next two years
and 16 million shortly afterward—
which would bring new car sales
back to almost pre-recession levels.
What’s heating things up is pent-up demand, he explains,
noting that the average age of cars on the road is at a record
level: 10.5 to 11 years.
“There are people now who have changed their carbuying
habits and realize they don’t have to buy a new car
every three years,” says Hampel. “But there is a larger
segment that is tired of hanging onto that old car and dealing
with its problems. More consumers are feeling sufficiently
confident about their economic prospects and job security
that they will go out and buy. New car sales should be pretty
robust the next few years.”
Manufacturer incentives stealing new financing
Hampel also notes that, for some reason, credit unions
Empire State
credit unions are
competing effectively.
nationally are not getting their share of this growth. He
surmises that manufacturer incentives could be a big reason—
and now that U.S. automakers have retooled and improved
their manufacturing to run production lines in accordance
with consumer demand, they will begin to remove the
widespread incentives in the coming years.
Nealon believes one reason New York credit unions are
doing much better than the national average is because they
are simply working harder. “They realize the auto loan is the
best option for their portfolios now, in return and risk. There
is a lot of attention on interest rate risk, and auto loans, as we
know, turn over quickly,” he says.
Empire State credit unions are competing effectively both
on the direct and indirect sides, adds
Nealon. Indirect channels are faring best,
due to lenders building strong programs
based on excellent dealer relationships.
New member-focused efforts are
lifting the direct channel, as well. “We
are seeing more credit unions in New
York do more with preapprovals and
finding ways to engage the member
early on in the buying process so they
don’t lose them later,” notes Nealon.
Some of those steps are car-buying and
research tools on credit union websites, as well as automated
programs that make it simple for dealers to close a loan with
the credit union member.
The direct market is still very tough, according to three
New York credit unions—Nassau Educators FCU (NEFCU),
Hudson Valley FCU (HVFCU) and Olean Area FCU—that
are all growing loans well through indirect channels.
NEFCU placed 6th in the nation for 12-month auto loan
growth as of June 2011, according to Callahan’s 2012 Credit
Union Directory. Year over year, the credit union is up $96
million in its auto loan portfolio, a 44 percent increase over
2011. “We have been able to find pockets of business and
make them grow,” says Chuck Price, NEFCU’s AVP of lending.
4 SEPTEMBER 2012 Connection