How 3 Financial Institutions Boosted Auto Loan Margins in 2020

Banks and credit unions in 2020 faced many challenges, but by the third quarter, lending portfolios overall showed signs of recovery. However, a few lending sectors continue to struggle.

According to an article from American Banker, the NCUA quarterly report shows that credit unions in Q3 2020 saw overall interest income decrease 0.5%, to $60.5 billion as earning from investments fell more than 24%, to $6.3 billion. ROA dropped to 66 basis points, down from 98 basis points for the same period in 2019, but it was an improvement from the first and second quarters of 2020. In addition, student loan, commercial loan and credit card balance growth improved alongside lower delinquency rates.

Banks’ reporting is very similar. The FDIC recently reported the average net interest margin for commercial banks fell by 68 basis points from a year ago to 2.68%. Net interest income at these banks also declined by a record $10 billion, or 7.2% from Q3 2019. The net interest margin for community banks was pushed down 41 basis points year-over-year to 3.27%.

Worries remain for all lenders that delinquencies will rise as government assistance provided during the global pandemic is eliminated.

To better target your auto loan pricing and boost interest income, Open Lending’s Lenders Protection™ uses our proprietary data to gather a more comprehensive picture of potential borrowers, so you can say ‘yes’ to more loans – and interest income! We also back our loans with default insurance, so you can continue to confidently expand your auto loan portfolio.

Take it from our clients!

  1. Union Square Credit Union: Since partnering with Open Lending at the beginning of 2020, Union Square’s auto loan portfolio has increased by 21%! Net margins have increased by 150 bps, and their auto lending portfolio increased by $18.3 million over the last year.

  2. Silver State Schools Credit Union: Back in early 2019, Silver State Schools Credit Union made 344 loans under the Lenders Protection™ program for more than $8 million! Through the program, the returns on those loans performed well over expectations at 2.82%.

  3. Firelands Federal Credit Union: Firelands FCU did not expect to be booking up to 80 loans in just a couple of months after signing up for Lenders Protection™, but that’s exactly what happened. This has allowed them to be able to serve more members than ever while also saving time and money.

Car lenders face many struggles going forward, but better margins are possible. If you’re interested in learning more about Open Lending’s Lenders Protection™ program, click here for more information!