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By Dean Borland, SCMS, CUDE, VP Product Development, Credit Union Resources, Inc.

These days my waking hours are divided relatively evenly between exploring financial products, facilitating strategic planning, and doing my best to help spoil a gaggle of granddaughters. For the past few years, two of the three have merged into emphasis on looking for opportunities to help credit unions make more loans.

credit union new car loan

To be honest, in terms of the average loans to assets ratio, the Cornerstone states (Arkansas, Oklahoma, and Texas) are almost exactly where they were ten years ago. But, that does not mean we have been treading water. Credit union assets in the region almost doubled over the past ten years, growing from just under $48 billion in September 2003 to nearly $95 billion in September 2013. Back in the third quarter of 2003 our loans to assets ratio was 61.55%. At the end of September 2013 the average loans to assets ratio for the region was 62.86%. So, total loans outstanding actually grew from $29 billion to almost $60 billion in ten years!

Armed with that little bit of trivia, one could say, “Wait! Loans are not the problem! The problem is we are getting nothing for investments!” You would be right. The average yield on investments for Cornerstone region credit unions in September 2003 was 2.41%. In September 2007, the average yield for Cornerstone region credit unions topped out at 5.01% (just before Recession was declared). In September 2013, the average investment yield was 1.01%. Yep, declining interest rates have taken a toll on income and we have felt it in our bottom line. (Let’s not even mention stabilization – this is a “G” rated publication…)

However, something else happened while we were gathering deposits, watching interest rates decline, and doing everything humanly possible to control operating expense. We lost the new car war.

Ten years ago, credit union loan portfolios were anchored by auto loans, which made up over 58% of total loans outstanding. In September 2013, auto loans made up slightly less than 51% of total loans.

In September 2003, new auto loans made up an average 55.75% of total auto loans outstanding. In September 2013, new auto loans made up 44.35% of loans outstanding. Used auto loans, which made up 43.55% of total auto loans in Q3 2003, were 54.52% of total auto loans in September 2013.

Over the past ten years, if credit unions had experienced the same growth in new autos that we experienced in used autos (i.e., if the ratios were the same today as they were in 2003 AND used cars loans had grown at the same rate), credit unions in the Cornerstone region would have an additional $12.6 billion in auto loans on our books.

It is true that some credit unions run very effective auto loan recapture programs that convert new auto loans originated by other lenders into used auto loans on the credit union’s books. But, the fact remains that in today’s environment if a lender is not represented at the new car dealership there is a low probability that the credit union will get the new car loan.

Ten years ago, credit unions were highly reliant upon new auto loans. Ten years ago, Kodak was the king of photography. Ten years ago, Blockbuster dominated video rentals. Kodak invented digital photography but continued to focus on film and let the digital world pass them by. Blockbuster opened video rental stores across the country and was undone by DVD vending machines and digital rentals. Only the largest of credit unions successfully capture market share in today’s new auto finance market.

Want more loans? Get back into the new car lending game… 

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