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Credit unions have grabbed more market share for auto loans at the expense of banks and the lending arms of auto manufacturers, credit reporting firm Experian said in its latest quarterly automotive finance report.
Credit unions' share of all auto loans increased to almost 31% in Q3 2022 from 22.8% in 2021 and 22.2% in 2020 as the interest rates they charge borrowers are generally lower than those offered by other lenders.
Credit unions have become the top lender for used cars, with a 31.5% market share, up from 25.5% in 2021. Banks, meanwhile, saw their share drop to 28.4% in Q3 2022 from 35.0% in the prior year.
For financing new cars, auto makers' captive lenders still lead in market share at 44.2%, though credit unions (23.7%) are gaining ground on both the captive lenders and banks (25.6%).
In Q3 2022, the average interest rate of loans from credit unions was 5.94% for used cars, compared with 8.36% rate for bank loans, 8.80% for captive lender loans, and 18.53% for finance company loans.
The lowest rate that banks had offered since 2017 was 6.47% during Q4 2021, still higher than the highest average rate of credit unions had offered — 6.23% in Q1 2019.
Publicly traded stocks that may be most affected by credit unions' increase in market share are Ally Financial (NYSE:ALLY), Capital One Financial (NYSE:COF), and Credit Acceptance (NASDAQ:CACC).
While many big banks also have auto lending businesses, they're generally a smaller part of their overall operations. For example, JPMorgan Chase (JPM), Wells Fargo (WFC), Banco Santander (SAN), Toronto-Dominion (TD), Bank of America (BAC) are all in the top 10 auto lenders, according to BizVibe. Captive lenders include Toyota (TM), Ford (F), Nissan (OTCPK:NSANY), and Honda (HMC). Here's a chart showing how a handful of auto lender stocks performed in the past year.
Last month, a New York Fed survey found consumer are less likely to apply for an auto loan, mortgage, or mortgage refinancing within the next 12 months.