Automobile Loan Portfolios Zoomed Ahead in 1st Half

By Arndorfer, James B. | American Banker, September 2, 1994 | Go to article overview

Automobile Loan Portfolios Zoomed Ahead in 1st Half


Arndorfer, James B., American Banker


Credit unions expanded their auto loan portfolios at nearly twice the rate of the competition during the first six months of 1994.

The industry's car loan portfolio grew 12.4% during the six months ended June 30, compared with 6.4% growth for the total auto loan market, according to figures compiled by the Credit Union National Association.

Credit unions gained by keeping rates low and becoming more aggressive, analysts and industry officials said.

"As market interest rates rise, financial institutions have been increasing their loan rates," said William F. Hampel, chief economist for Madison, Wis.-based CUNA. "Credit unions have trailed the market in rates they offer."

Auto rates at credit unions were 80 basis points to 110 basis points lower than at banks during the first six months of 1994. This is up from a 40-basis-point to 60-basis-point gap last year, Mr. Hampel said.

"An 80- to a 110-basis-point difference is enough for the consumer to notice," Mr. Hampel said. The average credit union's new-auto loan rate is 7.15%, compared with the average bank's rate of 8.37%.

The new-auto loan portfolio at North Carolina State Employees Credit Union jumped 40.7%, to $157.7 million, during the first six months of 1994.

"There's no magic formula. We just offer the lowest rate and high convenience," said James C. Blaine, president of the Raleigh-based credit union, which has $3.7 billion of assets.

The credit union offers a fixed, five-year 6.5% rate on new cars and can dose loans in 30 minutes, Mr. Blaine said.

Through June 30, the industry's outstanding auto loans grew 12.4%, to $62.6 billion. That's more than a third of the industry's total loan portfolio, according to CUNA. The rate of growth this year is 44% higher than in the year-earlier period, when auto loans grew 7%.

New-car loans grew 12.1%, to $37.1 billion, during the first six months of 1994; used-car loans were up 13%, to $25.5 billion.

Thanks to this expansion, the industry gained a larger slice of the $300.4 billion auto loan market. Credit unions controlled a 20.8% share of the market as of June 30. That's up from 19.5% a year earlier.

These gains were registered in spite of larger credit unions' focus on mortgage lending until recently, analysts said. …

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