IRVINE, Calif.–The economy may be in a state of strain and flux due to the threats of tariffs by President Trump, but one person believes the auto lending market is going to be “really good” for credit unions over the next six months.
Indeed, the foot has been on the gas year-to-date for credit unions on the CU Direct Lending (CUDL) platform from Origence, and that’s not likely to change in the near-term, according to Bob Child, chief operating officer with the company.
The market is likely to be strong enough that one challenge to credit unions will be to keep from panic-buying their way into overpaying for a vehicle and ending up with negative equity, he cautioned.
“I don’t know if it was because of tax refunds, or three more selling days in the month of March, or tariff fears, but new car sales jumped big time in March,” said Child, pointing to the 11.1% increase in new car sales, which if it played out over a full year would represent a robust 17.8 million vehicles sold. “When I look at Origence and credit union loan volumes during the month of March, we spiked up more than 12% and year to date we are up more than 11% compared to Q1 of 2024.”
The Bread and Butter
When it comes to the used car market, which Child reminded is the “credit union bread and butter,” used car loans on the CUDL platform year to date are up 28% compared to the same time last year.”
Of course, as demand for new cars rises, so does demand and prices on used vehicles , especially with some forecasting that tariffs could potentially raise prices by more than $5,000 per vehicle. And that plays to a strength for a certain segment of the market.
“Credit unions are the best, the absolute best, at used car lending,” said Child.
‘Really Good’ Market
The next three to six months are going to be “really good,” Child is predicting, as both new and used car sales remain strong and the auto manufacturers reduce many of their special financing deals.
While loan volume has been down overall, Child said credit unions have been “clearing the decks” and are now hitting the ground running in 2025.
That doesn’t mean there are some potential potholes in the loan road.
“I was really freaked out in the first quarter of 2025 by the spike up of negative equity,” said Child, again stating the scenario is a flashback of sorts. “What ended up happening in 2021…was a lot of credit union members paid over MSRP for their cars. The average loan life is like 26 months or so, and so you come to 2025 and you’re starting to see all this negative equity as these people are looking to buy a new car again. “
The Silver Lining
Delinquency has been starting to move up, even in credit union land. But there’s an offset which is now starting to happen and that is that used car values are going up because there’s more demand, because the price of new is going to start going up, Child explained.
“I think this is going to help credit unions in the near term,” he continued. “It’s going to help some of our members that were stuck in negative equity and, hopefully, they’re smarter this time around. And there are going to be more loan opportunities on the used side that we didn’t get in 2024 because people were going new.”
A Feeling of Deja Vu
Child said that for many auto dealers the scenario is déjà vu, with dealers remarking how similar the current environment is to the era of the chip shortage in 2021 that created shortages and drove up prices of new and used vehicles. The dealers have told Origence they are turning back to that earlier “playbook.”
The Role of Rental Companies
Another 2021 scenario that may be set to replay for many involves the auto rental companies, Child added, as those firms typically sell their fleets into the used car market. But as was the case in 2021, one strategy being considered is to not sell cars on a typical schedule as they approach 20,000 miles, but instead to hold on to them even as the odometer approaches 60,000 miles.
That would reduce the number of used cars on lots.
Refi Opportunities
Child is forecasting credit unions are going to see a pick-up in refinancing activity after a quiet period, noting some credit unions such as PenFed are especially strong in the refi market.
What takes place in the market is also going to be dictated by the state of various manufacturers, according to Child. He noted that dealers that sell brands owned by Stellantis, General Motors and Ford, along with the OEMS themselves, have approximately 120 days of inventory on hand, all of it pre-tariff, which gives them room before they must increase prices.
On the other hand, brands that include Toyota, Honda and Subaru have much thinner inventories, which means they would be forced to raise prices more quickly as the result of any tariffs.
Where are Buyers’ Heads?
So, what to make of the mindset of would-be car buyers? Buyers are of numerous different minds, Child said, including those racing to buy a vehicle out of fear of tariffs-driven price boosts. Some of that has already happened, hence the strong lending volume Origence and the credit unions on its platform are seeing, he pointed out.
“I don’t think we’re going to see the same (volume) all the way through April,” Child said, suggesting pent-up demand will have played out relatively soon.
“Then you’ve got that middle group who are either going to delay a purchase or they’re going to bounce down to a certified pre-owned or a one- to two-year-old vehicle, which I think is going to benefit credit unions,” Child told the CU Daily. “Or, they’re going to hold off altogether and wait six months, nine months and see how this thing plays out.
“But near-term over the next six months, I think credit unions are still poised very well,” he added.
The Positives
Other positives over the near term, according to Child: a decline in delinquencies and an improvement in the state of members who have negative equity in their vehicle.
And one other positive: It doesn’t appear the manufacturers are going to be offering the kinds of subvented financing rates and incentives they have in the recent past.
“They were starting to soften in February but really took a drop in March. I think they’re recognizing they don’t need to put subvention out there…because they’ve got limited supply and people are going to pay whatever.”
And that raises the question of whether the 2021 market realities will resurface this year when consumers were paying above sticker and dealers were seeing strong profits, Child observed.
The Lessons Learned
What lessons should credit unions have taken away from that period in 2021 that may be applicable as the 2025 market shakes out?
First, said Child, credit unions should strongly discourage members from doing things like paying $10,000 over MSRP.
“Let’s not be doing that stuff. Help your member understand that…you’re going to be a negative equity…in a few years,” recommended Child. “I do fear that some members will do that, so I think there’s a need for a bit of an education from that perspective.”
He also urged credit unions to put an emphasis on their refinancing programs for members in bad loans.
Child advised credit unions to hit dealer lots and to remind that CUs “are there for them. We want to help them finance as much of that activity as possible.”
The EV Market
When it comes to the electric vehicle market, Child noted that a unique aspect of EVs is that Tesla, Rivian and Lucid vehicles are almost exclusively manufactured in the United States. The tariffs will likely “tank” exports to those countries that enact reciprocal tariffs, but would largely leave those brands unscathed domestically, Child said.
Time to Increase ALL?
As to the question of whether credit unions should increase their loan-loss reserves due to the tariffs or a broader economic slowdown or even a recession, Child said like so much else there is great uncertainty.
But he did express concern for credit unions in the eastern U.S. that have a large proportion of federal workers whose jobs have now been eliminated by the Trump administration. Those widespread layoffs are likely to hit some CUs quite hard.