Are CU’s Entering a Car Loan Danger Zone?

July 5, 2017 at 9:12 am Leave a comment

Credit unions have benefited as much as any other lenders from America’s car buying spree  So the news that car sales declined for the sixth straight  month in  June is something to keep an eye on as you survey the  horizon for potential trouble spots.

The conventional wisdom is that the length of the decline  signals that the auto  industry is in for an inevitable slowdown  following record sales of 17.5 million cars in 2016.   Conventional wisdom also holds that this decline does not signal problems with the larger economy.  For example, the downturn is being led by a pullback in fleet purchases from rental companies;   consumer car loans are actually up slightly.

Still,  economists have consistently overestimated the strength of the post-recession recovery and a sniffle in auto sales could be a cold for the industry. According to the most recent industry snapshot new car loans represent more than 13 percent of CU loan portfolios and used car loans another 21 percent.  Combine this with the fact that the average  length of car loans now exceeds 69 months and it’s not a stretch to suggest that car loans could emerge as an industry soft spot.

Entry filed under: econony, General. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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