Top trends shaping credit union auto lending

The auto lending landscape is changing, and that creates meaningful opportunities for credit unions ready to adapt. Rising vehicle prices and growing competition from major banks in the pre-owned segment make it essential for credit unions to lead with a proactive, dealer-focused lending strategy. Those that do can capture more member loans, deepen relationships, and strengthen their competitive position.

Opportunity comes with complexity. Inflation, tariffs, and the loss of EV credits have pushed more buyers toward pre-owned vehicles, even as loan terms extend and member credit profiles shift. At the same time, banks are forward-pricing loans in anticipation of rate drops, creating pressure—but also a window—for credit unions to refine asset-liability strategies, sharpen pricing models, and maintain strong risk management. With the right approach, credit unions can meet members where they are financially while protecting long-term portfolio health.

Understanding how these forces interact is essential for planning the next phase of growth. Here are three trends shaping the future of credit union auto lending.

1. The market is shifting—and credit unions need to be ready

As new car prices rise—driven by inflation, tariffs, and the loss of EV credits—more consumers are turning to pre-owned vehicles. This shift has boosted trade-in valuations but also intensified competition in the pre-owned car market, especially around rates and terms where credit unions traditionally stand out. Banks are forward-pricing loans, anticipating interest rate drops to stay competitive. To keep pace, credit unions must adjust their asset-liability management (ALM) strategies and pricing models.

Operational efficiency is also critical for continued growth. Credit unions should aim to automate more than 70% of system decisions, adopt AI for document processing and alternative scoring, ensure weekend loan officer availability with a flexible mindset, and clearly demonstrate fast funding capabilities to dealers.

One in three credit union members is actively considering a vehicle purchase. This presents a prime opportunity for credit unions to offer competitive rates, personalized service, and flexible terms—especially in the pre-owned car segment, where demand remains strong and credit unions have a proven advantage.

2. Extended loan terms: A double-edged sword

One of the most notable trends in auto lending is the rise of extended loan terms. According to Experian’s State of the Automotive Finance Market report, new car loan terms now average 69 months, and pre-owned car loans average 67 months. Terms can reach upwards of 96 months, all driven by rising vehicle prices and consumer demand for lower monthly payments. While these longer terms can help credit unions win business, they also introduce new risks.

Extended terms increase exposure to depreciation and default, particularly if the borrower’s financial situation changes. They also challenge traditional underwriting models, which may not fully account for the long tail of risk associated with longer loans.

Credit unions must approach this trend with caution. Offering extended terms can be a valuable tool—but only when paired with rigorous risk assessment, member education, and portfolio monitoring.

3. Evolving credit profiles: Understanding the new borrower

Today’s borrowers are not the same as they were five years ago. Credit profiles are evolving, shaped by pandemic-era deferrals, rising consumer debt, and shifting employment patterns. Many members now fall into “near-prime” categories, requiring more nuanced underwriting and member engagement.

Credit unions have an advantage here. The relationship-based model allows credit unions to look beyond the credit score and understand the full financial picture. By leveraging data analytics and AI-driven tools, credit unions can assess risk more accurately and offer tailored solutions that meet members’ needs without compromising portfolio integrity.

High-impact strategies to strengthen your lending performance

To navigate this landscape successfully, credit union leaders should consider these strategies:

• Recalibrate risk models: Update underwriting criteria to reflect extended loan terms and evolving credit profiles. Incorporate alternative data sources and predictive analytics to gain a more holistic view of borrower risk.
• Enhance member education: Longer loan terms and higher vehicle prices require more financial literacy. Equip members with tools and resources to understand the long-term implications of their borrowing decisions.
• Strengthen dealer relationships: Partner with dealer groups to ensure credit unions remain top-of-mind during the financing conversation. Refer to your indirect lending platform to streamline these partnerships and deliver fast, seamless approvals.
• Leverage technology to combat fraud: As fraud becomes more sophisticated, credit unions must invest in AI-powered fraud detection and prevention tools. Check out any integrations within your platforms that can help you stay ahead of emerging threats.
• Monitor portfolio performance in real time: Use real-time analytics to track loan performance, identify early warning signs, and adjust strategies proactively. This is especially critical when offering longer terms or serving near-prime borrowers.

Moving forward with confidence

The lending landscape is evolving, and credit unions have an opportunity to lead with purpose. By embracing innovation, strengthening dealer partnerships, and staying focused on member needs, you can turn today’s challenges into long-term growth. Let’s move forward together—driving smarter strategies, deeper relationships, and greater value for the communities you serve.

Ready to take the next step? Explore how Origence can help you optimize lending strategies, deepen dealer relationships, and deliver exceptional member experiences.