Car lending is moving online. It is now common for customers to purchase a car 100% online. While some car loans were being made online before the pandemic, COVID accelerated that trend and the technology behind it. Fifteen percent of CarMax's sales are online. Carvana and Tesla do a lot of sales online as well. Carvana will even deliver a car to a customer's house.
While banks have been making new and used auto loans, coming into 2021, credit unions had all they could handle with first mortgage and mortgage refinancing volumes. As those subside, credit unions may be a little late to the auto loan party.
Banks have been trending towards fully automated car loan approvals, which fit nicely into the online auto sales theme. But that leaves out credit unions, which have more of a human touch to loan approvals.
Dealer lots are at their lowest new car inventory in over 20 years. This low inventory in new cars coincides with many auto factory shutdowns during 2020 because of the pandemic. However, a lot of auto sales volume has been with used cars.
That bodes well for credit unions. Credit union car loans are higher for used cars than with new cars. Given the strong sales in used cars, loans on these vehicles should strengthen credit union loan portfolios.
Also, not everyone will want to buy a car online. Dealerships aren't going anywhere, and customers who visit a dealership expect service. They want their questions answered and maybe even test drive a car. That's all human touch customer service; something credit unions are good at.
While banks are in a race to automate the customer experience, credit unions can differentiate themselves through personal customer service. Not all dealerships will offer fully automated loans, though. Those that want to keep human interaction involved in their customer service may find that credit unions are the perfect fit.
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