The Future of Auto Lending: What CUs Should Know

Tony Boutelle, CEO of CU Direct and breakout session speaker during REACH 2020
Tony Boutelle, CEO of CU Direct and breakout session speaker during REACH 2020

How is the future of auto lending impacting credit unions? You’ll need a quick perspective of recent auto sales trends combined with ongoing innovation, according to Tony Boutelle, a breakout session speaker on Monday, Oct. 26 during the kickoff for REACH 2020.

Boutelle said new car sales in the United States will most likely increase 8.7 percent in 2021 and 3.3 percent in 2022, yet this year-over-year sales growth will still be below expected levels if the COVID-19 recession hadn’t hit the economy. While used vehicles are very valuable right now and sales prices are high, captive finance by dealerships/manufacturers is seeing the highest annualized lending growth due to zero percent new-car financing competition.

About 3.5 percent of credit union auto loans were under forbearance as of late September due to the economic slowdown from the COVID-19 pandemic. However, credit unions remain “bullish” going forward since they put away reserves to accommodate for any upcoming delinquencies (an issue coming in 2021), Boutelle said.

Regarding digital auto buying, the COVID-19 pandemic has fast-forwarded a trend that was already in the works for many years: faster digital purchasing. The “new normal” car buying experience that has slowly been experimented with is now here full-steam. More often, consumers will be negotiating online, financing online, and purchasing online. Some forecasts say 20 percent of used car sales may happen completely online by 2030.

“We’re looking at how we can shift pre-approvals even more up the digital scale for credit unions,” Boutelle said. “We’re seeing a shift where more negotiations for new cars are being done online. In the end, you’ll only need to visit the dealership to make the final transaction.”

New technologies — such as connectivity, autonomous driving, data sharing, and electric-drive systems — will be the four trends shaping the auto industry moving forward. However, the real revolution is intelligently linking all four together. Autonomous technology was seeing challenges before COVID-19 hit, from a safety/security and regulatory perspective. While it’s still years away, a huge shift to electric vehicles is probably in the works over the next 10 – 15 years.

“All of this will lead to a shift in the sales funnel where more lending will happen in that spot,” Boutelle said. “Credit unions will want to do as many pre-approvals as possible with their members and have them ready on the CUDL platform at the dealership.”

You can watch Tony Boutelle’s session and also catch the entire conference in real-time or on-demand! Click here to experience this exclusive virtual conference on Oct. 26, 28 and 29, and Nov. 4 and 5. REACH 2020 is one of the credit union industry’s premier annual events, drawing leaders and system partners from across California, Nevada and the United States.

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