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Credit unions grab market share from banks for auto loans

Written on Jan 11, 2023

Credit unions have cut into market share for auto loans at the expense of banks and the lending arms of auto manufacturers, Experian reported in its latest quarterly automotive finance report. 

Credit unions' share of all auto loans increased to almost 31% in Q3 2022 from 22.8% in 2021 and 22.2% in 2020 as the interest rates they charge borrowers are generally lower than those offered by other lenders. 

Credit unions have become the top lender for used cars, with a 31.5% market share, up from 25.5% in 2021. Banks, meanwhile, saw their share drop to 28.4% in Q3 2022 from 35.0% in the prior year. 

For financing new cars, auto makers' captive lenders still lead in market share at 44.2%, though credit unions (23.7%) are gaining ground on both the captive lenders and banks (25.6%). 

In Q3 2022, the average interest rate of loans from credit unions was 5.94% for used cars, compared with 8.36% rate for bank loans, 8.80% for captive lender loans, and 18.53% for finance company loans. 

The lowest rate that banks had offered since 2017 was 6.47% during Q4 2021, still higher than the highest average rate of credit unions had offered — 6.23% in Q1 2019. 

Last month, a New York Fed survey found consumers are less likely to apply for an auto loan, mortgage or mortgage refinancing within the next 12 months.