ATLANTA — The latest Equifax National Credit Trends Report revealed that auto finance companies have increased lending by more than 47 percent over the past two years. Auto finance lenders also have outpaced bank and credit union in lending to subprime borrowers over the same time period.

The report indicated that there were 854,800 auto finance company-originated loans in July 2011 vs. 581,300 for July 2009. Auto loans made to subprime borrowers now account for 38.5 percent of all auto loan originations for auto finance companies and 17.6 percent for banks and credit unions — numbers that are quickly approaching pre-recession levels, reported F&I and Showroom magazine.

By contrast, 820,200 loans were originated by banks and credit unions for the same period in July 2011 vs. 832,000 for July 2009, a decrease of less than 2 percent, according to Equifax.

Delinquency rates continue to improve for outstanding auto loans currently 60 or more days past due, which have fallen to 1.63 percent of loans. The improvement reflects a continuation of sustained credit retraction that the auto lending industry has experienced earlier than other lending segments, said Michael Koukounas, senior vice president of Special Client Services for Equifax.

“With unemployment rates remaining elevated for a prolonged period, auto lenders have proactively adopted more comprehensive data and verification tools for greater loan-level transparency in evaluating a wider band of consumers, which has helped enable the auto lending industry to recover more quickly than others,” he noted.

In July 2011, 1.7 million auto loans worth $32 billion collectively were originated, according to Equifax. From January to July 2011, 11.3 million new auto loans worth a collective $213.9billion (a 14.8 percent increase vs. the same six-month period last year) had been originated, a 13.2 percent increase over January-July 2010 totals.

The report also revealed that average monthly payment has remained relatively unchanged over the last year, signaling that the growth the industry is experiencing is tied to increases in number of loans rather than an increase in average loan amount, Koukounas added.

ONTARIO — After hitting a monthly low in March, CUDL credit unions have increased their market share by nearly 2 percentage points, and have maintained a share of more than 17 percent since May, CUDL, which provides an indirect lending platform that connects dealers to about 950 credit unions, revealed in late September. On a year-to-date basis, credit unions own a 16.7 percent share of the auto finance market.

Representing the seventh largest auto finance segment through August 2011, CUDL credit unions have financed more than 321,000 loans year to date, a 13.4 increase, reported F&I and Showroom magazine.

The segment’s auto loan penetration rate did decline to 16.1 percent in the second quarter from 16.6 percent in the year-ago quarter. However, credit unions were able to increase their unit loan volume by 13.4 percent through August.

“Although the total number of loans was flat since the first quarter of this year, the number of credit union members continues to grow,” said Andrea Salgado, a CUDL market research analyst who led the Sept. 28 Webinar.

Citing data provided by Callahan & Associates, Salgado added that auto loans represented 29 percent of the average credit union loan portfolio, based on dollar volume.

Salgado also noted that auto dealers continue to be a major driver of new business for CUDL credit unions, with 67 percent of consumer financed at the dealership being new members. Thirty-three percent of loans originated at the dealerships were made to existing members.

“These values have stayed the same for the last several months,” said Salgado, who noted that indirect loans were down 5 percent. “A year ago this was at 67 percent for new and 34 percent for existing.”

Prime new-vehicle originations made on the CUDL platform represented 76.4 percent of auto loans originated, down two percentage points from a year ago. Prime used-vehicle originations dropped 2.9 percentage points to 67.3 percent. Average FICO score for CUDL credit unions stood at 729 vs. 733 a year ago. The industry’s average FICO score, according to J.D. Power and Associates, is 728.

Average amount finance for used vehicles among CUDL credit unions was $17,939, while the industry average through July stood at $17,385. Average amount financed for new was up from $25,680 a year ago to 27,880 through August, according to CUDL data.

As for loan performance, delinquencies and charge-offs for the segment continued to track below the 1 percent mark for auto loans outstanding. Credit unions also claimed the lowest 60-day delinquency rate among other lending segments, including banks, at 0.33 percent, with dollar volumes of at-risk loans dropping by $1 billion.

The Webinar also provided an update on the overall industry, with Salgado reporting that auto loan volumes have increased for all lenders except for Chase and Toyota. Ally, she noted, continues to lead the way, growing its loan volume by 51.9 percent year to date.

Salgado also noted a rise in new-vehicle sales vs. used-vehicle sales, the two segments crossing paths between June and August. In August, new-vehicle sales increased 7.5 percent from a year ago, while used-vehicle sales declined 3.3 percent. Through August, new-vehicle sales have climbed 11 percent from last year, while used increased 4 percent. Combined, vehicle sales grew by 6 percent during the first eight months of the year.

Sales right now are tracking at a 12.1 million-unit rate, an increase from the 11.4 seasonally adjusted annual rate recorded through August 2010. Currently, market analysts predict that the industry will end the year between 12.5 and 12.9 million units sold. Salgado said she believes the industry will end the year at the lower end of that range.

Wolters Kluwer Financial Services is now offering captive finance companies, lenders and auto dealerships universal closed-end motor vehicle lease agreements for all 50 states.

Wolters Kluwer’s universal close-end motor vehicle lease agreements are designed to meet Regulation M requirements and any other state and federal requirements on auto leasing. Offered in both print and e-form, the contracts are suitable for transactions with equal monthly payments or single payment. Additionally, the contracts are customizable, allowing captives and lenders the ability to include products and features unique to their leasing programs.

These lease agreements help ensure auto leases are in compliance with current federal and state-specific regulatory requirements, while also helping simplify leasing and back-office processes.

By relying on Wolters Kluwer Financial Services’ standard lease documents, captives and lenders can significantly lower costs associated with monitoring regulatory changes and developing and producing their own lease contracts. For dealerships, a universal lease agreement allows them to simplify and eliminate the programming and inventory costs they incur when using lease agreements from multiple providers.

The contracts are maintained by Wolter Kluwer’s compliance experts, who monitor legislative and regulatory changes affecting the indirect lending finance industry in 51 U.S. jurisdictions, and are protected by the company’s limited compliance warranty.

“Our indirect lending business was created to help lenders and dealerships comprehensively address various aspects of regulatory compliance,” said Lee Domingue, CEO of indirect lending at Wolters Kluwer Financial Services. “This offering is yet another example of that commitment. By providing an industry standard for auto lease contracts, we can help lease companies, lenders and dealers simplify the leasing process for their organizations and the customers they serve.”

MINNEAPOLIS – Indirect lending will be critical to the overall growth of U.S. banks and credit unions during the next two years, according to a recent survey by Wolters Kluwer Financial Services.

With auto loans becoming more attractive to some lenders following the mortgage crisis, research was conducted to get a broad view of banks’ and credit unions’ indirect lending activities in the future. The survey, conducted in September 2009, showed that more than half of 146 compliance officer and consumer lending officer respondents (53 percent) feel that indirect lending will be critical to the overall growth of their organization during the next 24 months. Credit unions were more likely to express that attitude than banks. More than 60 percent of the credit union respondents expect indirect lending to be critical to their organization’s growth.

As lenders look to do more business in the indirect lending space, they must also carefully assess what is needed to manage their growth. A key part of that process is identifying the risks associated with doing business with third parties, including auto, marine and RV dealerships.

“Risk and fraud prevention are critical in helping avoid problematic vehicle loans that can hurt a lender in the future,” said Lee Domingue, CEO of Indirect Lending at Wolters Kluwer Financial Services.

Lenders surveyed said their top concerns when working with dealerships to process indirect loans include

• incomplete loan documentation,
• lower quality applicants and
• dealers’ compliance knowledge.

“Lending institutions—particularly credit unions—can see a benefit in expanding their presence in the indirect lending market,” said Domingue. “However, this research shows dealerships that lenders, regardless of size or type of organization, really have the same concerns when it comes to financing vehicle loans. It’s important for dealers to be proactive in addressing those concerns if they want to build and maintain strong lender relationships.”