Credit Unions Cautiously Optimistic About Auto Finance Landscape, Expect Improvements Mid-2025

Mark Chandler

Credit unions are generally optimistic about the auto finance landscape through the end of 2024, but most don’t expect improvements in the liquidity and delinquency crises, or significant impact from lowered interest rates [1], until mid-2025, according to Credit Union Leasing of America’s (CULA) most recent “Future of Auto Finance – the Next Six Months” snapshot survey of credit union professionals.

Fulfilling credit union projections recorded in CULA’s last survey in January, where 40% of respondents said they expected to see growth in their auto finance portfolio in 2024, 42% of credit union respondents reported year-over-year loan volume increases. Fifty percent of those report loan volume growth of over 6%, and 21% experienced growth of 11% or more, as a result of positive impacts from this year’s slight decline in vehicle prices, interest rates and inflation. Of the 58% with no positive impact, 21% report that loan volumes have been flat, while 79% have experienced declines.

Overall, the majority are looking to mid-2025, and beyond, for significant improvements in the auto finance market. For example, nearly 60% don’t expect to see the auto loan delinquency rate stabilize until 2025 and, while 34% say they already see signs that the liquidity crisis is abating, the majority (60+%) see it lasting well into the next year and beyond. Likewise, the majority don’t anticipate changes in interest rates significant enough to impact their business until 2025 (it should be noted, however, that while there had been small interest rate declines at the time of this survey, it was deployed before the recent half point reduction).

“The overall sentiment of credit unions today is one of cautious optimism, with the vast majority expecting no declines in their auto finance portfolios across the next six months, and nearly half expecting further growth, a slight uptick from our January 2024 survey,” said CULA President, Ken Sopp. “That being said, continued uncertainties around the current auto finance market, as well as the presidential election, are pushing credit unions’ projections for improvements in liquidity and delinquency well into 2025.”

Sopp noted that 69% of those surveyed agreed that most consumers are waiting until after the election to make big ticket purchases, such as a vehicle. And, while the survey confirmed that 57% of respondents are feeling optimistic about the auto finance landscape through the end of 2024, 43% are apprehensive or pessimistic. Rising delinquencies, continuing inflation, high interest rates, and financial uncertainty are contributing to their apprehension or pessimism, with delinquencies and overall financial uncertainty the biggest factors.

Vehicle leasing continues to be a strong auto finance option for credit unions, with 76% saying that consumers are as likely to consider leasing today as they were when vehicle prices were higher because of leasing’s flexibility and affordability compared to long term auto loans. Interestingly, as electric vehicle (EV) sales reach record heights (albeit with a slower growth rate), credit unions expect that leasing will continue to increase as a percent of total EV purchases. In fact, EV leasing tripled YoY to a 35.2% share of all EV purchases in Q1 2024.

“The continued popularity of vehicle leasing with credit unions, even as vehicle prices soften, was a striking finding of the survey, although it makes perfect sense given the significant increase in car buyers opting for leasing in 2024,” said Mark Chandler, Vice President of Business Development for CULA.

Experian’s State of the Automotive Finance Market Report: Q2 2024 reports that vehicle leasing grew to 25.35% in Q2 [2], up from 21.14% last year and 19.30% in Q2 2022, as “consumers who continue to seek flexibility and affordability as the market evolves, see leasing as an optimal choice.”
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CULA’s “Future of Auto Finance – the Next Six Months” snapshot survey was conducted online from August 28 through September 18, 2024 among 120+ credit union professionals.

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