Auto loans to lead growth | 2018-10-19

CUNA economists believe that growth in loans to credit unions will remain strong, but will begin to reflect smaller increases in the future. Overall, we see credit union loans increasing 9.5% this year and 8% in 2019.

Auto loans will continue to lead the way. The average age of cars on the road is at an all-time high of 11.6 years, suggesting healthy underlying demand going forward. The growth in auto loans from credit unions has been a constant throughout the current recovery.

Data from the Federal Reserve and NCUA shows that outstanding new and used auto loans accounted for 31.6% of all credit union loans in mid-2018, up from 30.3% at the end. of 2017 and 22.4% in 2007.

Consulting firm IHS Markit predicts sales of new cars and light trucks for the year 2018 of 17.2 million units, a decrease of 1.3% compared to 2017, with a continued slowdown in the to come up. The company predicts that overall sales will decline by 0.9% in 2019.

Wards Intelligence has a similar forecast, with US sales down 2.1% in 2018 and 1% in 2019.

The dollar amount of outstanding new credit union auto loans increased 13.1% in 2017 and 11.7% in the fiscal year ended June 2018. This is consistent with HIS Markit’s opinion on slightly weaker sales trends.

The outlook for used car credit also looks favorable. Used auto loans from credit unions increased 10.2% in 2017 and 9.9% in the fiscal year ended June 2018. Moody’s Analytics predicts that used car prices will stabilize over the next few years.

That, combined with rising interest rates and tighter credit standards, should make more consumers seriously consider used cars throughout our forecast horizon. Growth expectations remaining close to double-digit levels seem reasonable in the current environment.

Looking ahead, in the 2020s, most experts predict a more obvious slowdown in the automotive sector. This is when many expect the effects of societal mobility transformation, such as ridesharing, carsharing, subscription services and autonomous vehicles, to become more pronounced. .

These changes are expected to be slow at first, but gain momentum over the next decade.

Berylls Strategy Advisors predicts a decline in car sales over the next decade, on average by 2% per year.

MIKE SCHENK is CUNA’s Deputy Chief of Advocacy for Policy Analysis and Chief Economist.

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