SOUTHFIELD, Mich. (2/24/12)--Credit unions could experience reduced auto loan demand as study by the firm R.L. Polk indicates American consumers are holding onto their cars and trucks longer than ever.
In the third quarter of 2011, the average length of ownership of vehicles purchased new rose to a record 71 months. Retention of vehicles bought used climbed to an all-time high of 50 months.
The average age of vehicles on the road is also on the rise, hitting a record of 10.8 years as of July, Polk said.
For credit unions that means there are fewer new cars and few used-cars on the market for financing.
Even though credit has eased in recent months, consumers may be hesitant to invest in vehicles while the job market remains weak and unemployment levels stay high, Polk said. Many consumers have financed their vehicles for longer time periods to create less expensive monthly payments, leading to longer ownership cycles.
Cars and trucks are also more durable than in the past, according to automotive agencies.
Over the next few years, new U.S. light vehicle sales will continue to trend upward slowly, reaching pre-downturn levels of 16 million by 2015, Polk projects. As the economy improves, pent-up demand for new vehicles will increase, Polk said.
However, average length of ownership will not immediately decline, Polk said. With unemployment still high and many consumers continuing to feel the effects of a long economic downturn, the trend of longer length of ownership likely will continue for at least the next few years.
Longer length of ownership has resulted in a lower used-vehicle supply, Polk said. The inventory of used vehicles and a declining supply of off-lease vehicles have allowed dealers to charge more for used cars. With the trend of increased vehicle retention expected to continue in the near future, used-vehicle sellers will benefit from higher prices for their top-line vehicles, Polk said.
Auto loan trends at credit unions reflect these trends. Growth rates for new-vehicle loans at credit unions declined 1.5% in the third quarter, according to the Credit Union National Association's U.S. Credit Union Profile Quarterly Results. In the second quarter, the new-vehicle growth rate declined 1.8%. Growth rates for used auto loans increased 2.2% in the third quarter after rising 2.3%.
New-auto loans accounted for 10.1% of credit union loan balances in December 2011, a decrease from 11% in December 2010, according to CUNA's December 2011 Monthly Credit Union Estimates. Auto loans accounted for 18.6% of loan balances in December, compared with 17.8 in December 2010.