Key Takeaways
- Auto loan ABS issuance from U.S. credit unions increased 20% to $2.07 billion in 2024, even though fewer credit unions accessed the market compared with 2023.
- The absence of programmatic issuance on a regular, planned basis will continue to influence the credit unions' issuance volume and presence in the auto loan ABS market.
- Issuance could reach or even exceed $2.25 billion in 2025, depending on the credit unions' securitization strategy. We expect a few repeat issuers and a limited number of new entrants to drive issuance.
U.S. auto loan asset-backed securities (ABS) issued by credit unions rose 20% to $2.07 billion in 2024 (see chart 1). This growth was buoyed by five credit unions: three new and two repeats. The two issuers that returned to the market, SCCU Auto Receivables Trust (SCCU) and PenFed Auto Receivables Owner Trust (PNFED), accounted for over 50% ($1.12 billion) of the year's issuance volume combined. The new issuers were GreenState Auto Receivables Trust (GRNST), FCCU Auto Receivables Trust (FCCU), and American Heritage Auto Receivables Trust (AHART 2024-1).
Despite this growth in volume, fewer credit unions accessed the auto loan ABS market as the number of issuers declined from six (four new and two repeats) in 2023 (see chart 2). Three of those new issuers did not return to the market in 2024 and at least one other issuer remained on the sidelines despite expressing interest. S&P Global Ratings believes the absence of programmatic issuance on a regular, planned basis will continue to influence the credit unions' issuance volume and presence in the auto loan ABS market. For instance, if SCCU's $669.3 million issuance amount in 2024 was closer to the other credit unions' $350 million average, then the annual issuance volume would have remained flat relative to 2023.
The stable issuance trends will likely continue this year. We forecast U.S. credit union auto loan ABS issuance could reach $2.25 billion in 2025, driven primarily by a few repeat issuers and a limited number of new entrants to the market. However, if the credit unions prioritize securitization as a financing tool, issuance could exceed $2.25 billion. Credit unions have financing needs, but it remains to be seen whether these institutions will engage more actively in the auto loan ABS market.
Chart 1
Chart 2
Decreasing Market Share May Have Kept Some Credits Union On The Sidelines
The credit unions' total market share for new and used auto loans declined for the second consecutive year to 23.66% as of third-quarter 2024 from 25.83% in 2023 and the 31.23% peak in 2022, according to Experian. Credit unions made a large splash into the auto loan ABS market in 2023, with issuance volume increasing by almost 200% year over year. This growth was partially fueled by origination growth in 2022, which was a pivotal year for credit unions as they became the leading financial provider of auto loans, eclipsing financial institutions, captive finance companies, and specialty finance companies. This market share increase reflected several factors, including the impact tighter credit conditions had on origination volumes at banks and captive finance companies, and the competitive interest rates the credit unions offered in the increasing interest rate environment.
However, this relative advantage has since waned. Captive finance companies have regained market dominance in the new vehicle loan financing market, with their market share increasing to almost 50% as of third-quarter 2024 from 35% in 2022. During the same time period, credit unions' new auto loan financing fell to 14% from 30% due to the increased competition from captive finance companies. As a result, some existing and many potential credit unions issuers have remained on the sidelines or are pursuing alternative funding options.
Discerning Risks For Credit Union Auto Loan ABS Collateral Pools
In the wake of the recent rise in credit union auto loan ABS, investors are keen to know how to best evaluate risk for credit union auto ABS collateral pools. We noted that, despite the securitizations' limited history, two familiar patterns outlined below have emerged for transactions that closed in 2023 and 2024.
Higher-than-expected loss performance due to new geographic footprints. Expansion into new geographical markets led to growth in origination, particularly in 2022. However, new lenders are often adversely selected due to the lack of significant underwriting history in the new competitive localities, leading to higher losses for some credit unions' auto loan ABS collateral pools. Our analyses of performance data spanning multiple credit cycles indicate that stable origination within established geographic areas and measured growth in new ones can result in low volatile loss performance.
Growing pains. For most credit unions, securitization reporting is a new requirement, and we have seen errors related to asset calculations (charge-offs, recoveries, overcollateralization, etc.) across several credit unions' ABS reporting platforms. However, these errors did not lead to significant revisions. Some credit unions are slower to establish the reporting infrastructure, which is a crucial component for the effective and efficient functioning of the auto loan ABS market, while others are not as familiar with securitization reporting requirements. These errors resulted in delinquency and charge-off errors in some trustee reports, but they primarily occurred a few months after the transactions' closing and were quickly resolved. We expect the incidences of errors to decline as credit unions become more familiar with the operational and reporting infrastructure required to support their auto loan ABS transactions.
State And Federally Chartered Credit Unions Liquidity Support Considerations
Investors have expressed interest in the difference between state and federally chartered credit unions with respect to their liquidity support and the level of federal involvement should such institutions enter conservatorship.
Federally insured credit unions (FICUs), which include both state and federal chartered credit unions, are required to secure at least one contingent federal liquidity source, according to National Credit Union Administration (NCUA) regulation 741.12. FICUs with assets of $250 million or more must have access to a federal liquidity source, which can be either the Federal Reserve Discount Window or the Central Liquidity Facility (which is managed by the NCUA). This federal liquidity source requirement was enacted in 2014 according to NCUA Regulation against the backdrop of a financial crisis that demonstrated the importance of liquidity.
The NCUA may place a credit union into conservatorship to resolve operational issues. The act of placing a credit union into conservatorship is different for federal and state chartered credit unions. The NCUA can place a federally charted credit union into conservatorship on its own discretion, whereas the state supervisory initiates the conservatorship for state chartered credit unions and, in many cases, appoints the NCUA as agent for the conservator.
Improved Credit Quality For Prime Collateral Pool Relative To Bank Peers
The credit quality of the collateral pools backing credit union auto loan ABS transactions generally improved in 2024 compared with the previous year. The weighted average credit score increased to 760 in 2024 from 740 in 2023, while the loan-to-value (LTV) ratio decreased to 99.6% from 103.3% (see table 1). In comparison, the rated transactions issued by their bank peers have a similar average FICO score of 762 and a higher average LTV ratio of 96.0%. The banks' collateral pools, however, are more than 3x larger and tend to be more geographically diversified. Most of the credit unions' transactions include a higher percentage of longer-term loans with original terms greater than 72 months.
Table 1
| Credit union auto loan ABS collateral characteristics | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GTE 2019-1 | UART 2021-1 | PAROT 2022-A | OCCU 2022-1 | GTE 2023-1 | VCU 2023-1 | GECU 2023-1 | OCCU 2023-1 | Ent 2023-1 | SCCU 2023-1 | AHART 2024-1 | PNFED 2024- A | SCCU 2024-1 | FCCU 2024-1 | |||||||||||||||||
| Receivables balance (mil. $) | 185.27 | 302.93 | 519.82 | 298.51 | 215.92 | 310.55 | 320.62 | 286.45 | 253.17 | 350.04 | 307.18 | 454.91 | 691.07 | 265.20 | ||||||||||||||||
| No. of receivables | 9,430 | 11,204 | 26,692 | 10,256 | 10,117 | 14,022 | 10,272 | 9,407 | 8,124 | 9,726 | 12,010 | 15,289 | 19,113 | 6,672 | ||||||||||||||||
| Avg. original loan balance ($) | 23,071 | 35,952 | 19,475 | 29,106 | 21,342 | 22,147 | 32,601 | 30,451 | 32,571 | 37,052 | 34,175 | 33,042 | 37,844 | 43,627 | ||||||||||||||||
| WA APR (%) | 5.60 | 4.99 | 3.86 | 5.71 | 6.60 | 7.92 | 8.19 | 7.19 | 8.75 | 7.41 | 7.86 | 7.89 | 7.96 | 8.07 | ||||||||||||||||
| WA original term (mos.) | 74 | 82 | 66 | 77 | 77 | 75 | 81 | 79 | 79 | 73 | 76 | 72 | 75 | 78 | ||||||||||||||||
| WA remaining term (mos.) | 64 | 64 | 48 | 76 | 64 | 68 | 77 | 70 | 75 | 70 | 66 | 64 | 71 | 70 | ||||||||||||||||
| WA seasoning (mos.) | 10 | 18 | 18 | 2 | 14 | 7 | 4 | 9 | 4 | 3 | 11 | 8 | 3 | 8 | ||||||||||||||||
| WA credit score(i) | 726 | 748 | 770 | 730 | 730 | 737 | 743 | 727 | 733 | 770 | 763 | 760 | 761 | 753 | ||||||||||||||||
| % of pool with original term more than 60 mos. | 89.73 | 97.98 | 53.30 | 88.39 | 92.19 | 85.26 | 95.25 | 95.29 | 94.16 | 81.94 | 89.67 | 78.77 | 86.69 | 93.51 | ||||||||||||||||
| % of pool with original term more than 72 mos.(ii) | 30.77 | 84.58 | 9.19 | 59.29 | 55.40 | 55.98 | 84.70 | 66.37 | 75.31 | 50.12 | 66.99 | 32.17 | 56.57 | 72.17 | ||||||||||||||||
| WA LTV | 93.38 | 108.46 | 86.89 | 109.88 | 102.39 | 105.41 | 104.41 | 104.80 | 109.06 | 95.73 | 96.36 | 94.64 | 99.94 | 110.91 | ||||||||||||||||
| New vehicles (%) | 32.41 | 55.04 | 44.08 | 29.65 | 29.07 | 20.14 | 33.32 | 33.58 | 24.78 | 45.61 | 84.70 | 24.83 | 44.84 | 38.87 | ||||||||||||||||
| Used vehicles (%) | 67.59 | 44.96 | 55.92 | 70.35 | 70.93 | 79.86 | 66.68 | 66.42 | 75.22 | 54.39 | 15.30 | 75.17 | 55.16 | 61.13 | ||||||||||||||||
| Top three state concentrations (%) | ||||||||||||||||||||||||||||||
| FL=98.10 | NV=32.59 | TX=10.15 | WA=46.23 | FL=97.78 | IA=38.37 | OH=59.74 | OR=52.17 | CO=97.42 | FL=100 | PA=49.51 | PR=15.51 | FL=100.00 | TX=100 | |||||||||||||||||
| GA=0.37 | KS=14.96 | CA=9.94 | OR=45.54 | GA=0.38 | NE=17.59 | KY=34.32 | WA=38.51 | WY=0.50 | NJ=34.62 | FL=9.76 | ||||||||||||||||||||
| NC=0.18 | CA=14.93 | FL=9.56 | ID=4.37 | NC=0.18 | MN=11.90 | IN=5.61 | ID=4.54 | NM=0.33 | OH=2.44 | TX=8.81 | ||||||||||||||||||||
| (i)Represents the VantageScore of FICO score, as appliable. (ii)Represents original term of more than 75 month for GTE 2019-1, UART 2021-1, PAROT 2022-A, OCCU 2022-1, GTE 2023-1, and OCCU 2023-1. GTE--GTE Auto Receivables Trust. UART--UNIFY Auto Receivables Trust. PAROT--PenFed Auto Receivables Owner Trust. OCCU--OCCU Auto Receivables Trust. VCU--Veridian Auto Receivables Trust. GECU--GECU Auto Receivables Trust. Ent--Ent Auto Receivables Trust. SCCU--Space Coast Credit Union. AHART--American Heritage Auto Receivables Trust. PNFED--PenFed Auto Receivables Owner Trust. FCCU--First Community Credit Union. WA--Weighted average. APR--Annual percentage rate. LTV--Loan-to-value. | ||||||||||||||||||||||||||||||
Mixed CNL Performance: 2023 Transactions Trending In-Line Or Slightly Worse Than Expected
The credit unions' auto loan ABS transactions that were issued in 2023 are performing in-line with or slightly worse than expected, while most of those issued before 2023 are performing well below expectations (see table 2 and chart 3). The relatively higher loss performance for the 2023 securitizations is partly due to the large percentage of loans in those collateral pools that were originated in 2022. Across the auto loan ABS market, the 2022 vintage has experienced higher-than-expected losses due to weaker underwriting, lower used vehicles values, inflationary pressures on consumers, and a higher interest rate environment.
The six 2023 transactions we rate are experiencing mixed loss performance:
- Three transactions are performing worse than our initial expectations: ENT Auto Receivables Trust 2023-1 (ENT 2023-1), GTE Auto Receivables Trust 2023-1 (GTE 2023-1), and OCCU Auto Receivables Trust 2023-1 (OCCU 2023-1). As a result, we revised our cumulative net loss (CNL) expectations to 2.75%, 2.60%, and 3.75%, respectively, from 2.35%, 2.10%, and 3.25% (see "Six Ent Auto Receivables Trust 2023-1 Ratings Affirmed," published Oct. 31, 2024; "Ratings Affirmed On Six Classes From GTE Auto Receivables Trust 2023-1," published June 4, 2024; and "One Rating Raised And Five Affirmed On OCCU Auto Receivables Trust 2023-1," published Feb. 7, 2024). Despite our higher revised losses, we were still able to affirm and upgrade some of the ratings on these three transactions.
- Two transactions are performing better than our initial expectations: SCCU Auto Receivables Trust 2023-1 (SCCU 2023-1) and Veridian Auto Receivables Trust 2023-1 (VCU 2023-1). As a result, we lowered our CNL expectations on SCCU 2023-1 and VCU 2023-1 to 1.95% and 2.00%, respectively, from 2.20% and 2.30% (see "Six Ratings Affirmed On SCCU Auto Receivables Trust 2023-1," published Dec. 16, 2024, and "Ratings Raised On Two Classes From Veridian Auto Receivables Trust 2023-1; Four Ratings Affirmed," published July 1, 2024).
- One transaction, GECU Auto Receivables Trust 2023-1 (GECU 2023-1), is performing in-line with our initial expectations (see "Six GECU Auto Receivables Trust 2023-1 Ratings Affirmed," published Dec. 16, 2024).
- GTE 2023-1 extensions rose to 0.92% in October 2024 from 0.24% in September 2024, primarily due to Hurricanes Helene and Milton. The extensions subsequently decreased to 0.18% in November 2024. GTE has significant experience managing through these types of natural disasters. The company's obligor base is primarily located in the Tampa Bay, Fla. area, and it has serviced auto loans in this area for many years. As a result, we don't expect the increase in extensions to have a negative impact on the ratings.
Table 2
| Credit union auto loan ABS collateral performance | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Transaction | Performance month | Pool factor | 60+ day delinquencies (%) | Current CNL (%) | Initial ECNL (%) | Revised ECNL (%) | ||||||||
| GTE Auto Receivables Trust 2019-1 | 48 | Paid off | Paid off | 0.72 | 3.00 | Up to 1.00 | ||||||||
| UNIFY Auto Receivables Trust 2021-1 | 46 | 10.72 | 0.63 | 0.70 | 2.75 | Up to 0.90 | ||||||||
| OCCU Auto Receivables Trust 2022-1 | 27 | 47.29 | 1.73 | 2.35 | 2.25 | 3.75 | ||||||||
| PenFed Auto Receivables Owner Trust 2022-A | 29 | 19.72 | 0.29 | 0.26 | 1.50 | 0.40 | ||||||||
| Ent Auto Receivables Trust 2023-1 | 15 | 63.19 | 0.77 | 1.04 | 2.35 | 2.75 | ||||||||
| GECU Auto Receivables Trust 2023-1 | 17 | 66.71 | 1.87 | 1.01 | 2.90 | 2.90 | ||||||||
| GTE Auto Receivables Trust 2023-1 | 20 | 45.23 | 0.86 | 1.93 | 2.10 | 2.60 | ||||||||
| OCCU Auto Receivables Trust 2023-1 | 16 | 62.69 | 0.80 | 1.63 | 3.25 | 3.75 | ||||||||
| SCCU Auto Receivables Trust 2023-1 | 13 | 65.00 | 0.35 | 0.27 | 2.20 | 1.95 | ||||||||
| Veridian Auto Receivables Trust 2023-1 | 19 | 52.35 | 1.15 | 0.55 | 2.30 | 2.00 | ||||||||
| FCCU Auto Receivables Trust 2024-1 | 7 | 81.04 | 0.47 | 0.12 | 2.10 | N/A | ||||||||
| PenFed Auto Receivables Owner Trust 2024-A | 5 | 85.96 | 0.15 | 0.11 | 1.55 | N/A | ||||||||
| SCCU Auto Receivables Trust 2024-1 | 6 | 81.45 | 0.40 | 0.12 | 1.95 | N/A | ||||||||
| American Heritage Auto Receivables Trust 2024-1 | 2 | 95.26 | 0.09 | 0.00 | 1.95 | N/A | ||||||||
| CNL--Cumulative net loss. ECNL--Expected CNL. N/A--Not applicable. | ||||||||||||||
Chart 3
Related Research
- Six GECU Auto Receivables Trust 2023-1 Ratings Affirmed, Dec. 16, 2024
- Six Ratings Affirmed On SCCU Auto Receivables Trust 2023-1, Dec. 16, 2024
- Presale: American Heritage Auto Receivables Trust 2024-1, Nov. 7, 2024
- Six Ent Auto Receivables Trust 2023-1 Ratings Affirmed, Oct. 31, 2024
- Presale: PenFed Auto Receivables Owner Trust 2024-A, Aug. 7, 2024
- Presale: SCCU Auto Receivables Trust 2024-1, July 11, 2024
- Ratings Raised On Two Classes From Veridian Auto Receivables Trust 2023-1; Four Ratings Affirmed, July 1, 2024
- Ratings Affirmed On Six Classes From GTE Auto Receivables Trust 2023-1, June 4, 2024
- Presale: FCCU Auto Receivables Trust 2024-1, May 16, 2024
- Credit Unions Make A Splash In 2023, Almost Tripling 2022's Auto Loan ABS Issuance, Feb. 9, 2024
- Presale: SCCU Auto Receivables Trust 2023-1, Dec. 1, 2023
- Presale: Ent Auto Receivables Trust 2023-1, Sept. 21, 2023
- Presale: OCCU Auto Receivables Trust 2023-1, Sept. 19, 2023
- Presale: GECU Auto Receivables Trust 2023-1, Aug. 3, 2023
- Presale: Veridian Auto Receivables Trust 2023-1, May 18, 2023
- Presale: GTE Auto Receivables Trust 2023-1, April 20, 2023
- Presale: OCCU Auto Receivables Trust 2022-1, Oct. 4, 2022
- Presale: PenFed Auto Receivables Owner Trust 2022-A, Aug. 15, 2022
- Presale: UNIFY Auto Receivables Trust 2021-1, March 11, 2021
- Presale: GTE Auto Receivables Trust 2019-1, Oct. 31, 2019
This report does not constitute a rating action.
| Primary Credit Analyst: | Steve D Martinez, New York + 1 (212) 438 2881; steve.martinez@spglobal.com |
| Secondary Contacts: | Clayton Castro, Englewood; clayton.castro@spglobal.com |
| Frank J Trick, New York + 1 (212) 438 1108; frank.trick@spglobal.com |
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