White Paper

Rising AUTO LOAN rates

Rising AUTO LOAN rates – What does this mean for your Credit Union?

The goal of this white paper is to explore the opportunity that the current auto loan market presents to Credit Unions. It provides an overview of how the Federal Reserve controls interest rates based on macroeconomic factors like unemployment, inflation, gross domestic product and public debt. Further it branches public debt into different types of debt focusing on auto loans. In Q1 2018, Credit Unions have been found holding 21.3% of auto loan market share based on a total number of auto loans and stood third next to Captive Auto. Interestingly, in terms of auto loan balances, they occupied the second place next to banks with $319 billion.

The average interest rate offered for a new car by Credit Unions was also found to be 1% lower than the overall auto loan market rate, which partially explains the rising foothold of Credit Unions. Consumers are more than ever considering Credit Unions as their preferred way of financing auto loans. This opportunity presents the right time for Credit Unions to resort to more advanced and newer ways to help their members by powering analytics and data science to price their auto loans to the traditional risk based pricing. Credit Unions need better methods to provide themselves with an optimal analysis of borrowers reducing delinquencies and charge offs and at the same time enabling them to offer their borrowers the most competitive rates.

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