Shifting Car Sales
FIs could see a shift in the types of cars buyers finance in 2017. According to GasBuddy.com, Americans will spend $52 billion more in 2017 than in 2016 on gasoline as a result of price hikes and increase in gas taxes. Due to lower fuel prices in 2016, sales of larger vehicles, trucks and SUVs increased, while smaller high-mileage cars did not sell as well.
As we’ve noted in prior issues of the Insight Vault, the auto lending business is shifting (pun intended), with firms like USAA aggressively courting car shoppers with its car buying service, and JP Morgan Chase partnering with TrueCar to disrupt the car buying process. Credit unions committed to auto lending not only face challenges from these large players, but if CarBuddy.com is correct, they will end up financing smaller—and hence, cheaper—cars in 2017, which will have a negative impact on interest income. Credit unions could use the rising cost-of-car-ownership as an opportunity to cross-sell credit cards with extra cash back for gas purchases to borrowers.