CUNA Senior Economist Dawit Kebede, PhD released his outlook on the auto lending market, focusing on credit union loan originations. A few key takeaways include:
- The auto inventory/sales ratio dropped down to 0.5% in September, the lowest rate since data became available in 1993. Early estimates reveal that the global auto industry is expected to lose $210 billion in 2021. This decline is due to computer chip and labor shortages, port backlogs, and transportation costs.
- Used cars are not depreciating in value during the pandemic. In 2021, used car value has increased by 30%. This increase in used car value is caused by supply chain issues in new auto production and delivery, and growing competition to local dealerships from online marketplaces such as Carvana.
- In 2020, credit union auto loan growth came in at 1.3%, a decrease from the 2019 growth rate of 2.5%, due to the economic downturn brought on by the pandemic. Before 2019, credit unions enjoyed six consecutive years of double-digit loan growth.
“A negative loan growth rate for new cars is not uncommon during a period of economic downturn. In early 2020, over 20 million people lost their jobs, creating a significant decline in consumer spending, and consequently, in loan originations. This year we saw an upward trend, but we ran into another problem—supply shortages.” – Dawit Kebede
A summary of Dawit’s analysis can be found here.