Distribution of credit union loans

Americans rely on automobiles for the basics of life necessities, such as getting to work, dropping kids off to school or child care, buying groceries, or obtaining medical care. According to the Annie E. Casey Foundation, 88% of American workers drive to work and two-thirds of jobs are located in suburbs. Relying on public transportation, if available, can double commute time. In fact, the foundation reports that not having a car is the single biggest barrier to escaping poverty.
Think about it. Without a car, your housing options are limited to places within walking distance of public transportation that may not be the safest neighborhoods. Your job opportunities are limited, as well. Don’t even think about a career ladder. And forget about shopping for groceries or clothing at stores offering the best prices and selections. It’s whatever is closest. Child care or medical care? Again, options are very limited.
An important strategy for strengthening a household’s economic well-being is to help it achieve economic mobility through a reliable, affordable car. Vehicle lending has served as credit unions’ “bread and butter” in the past. The bad news is that auto loans as a percentage of credit unions’ loan portfolio has been steadily declining for the past six years. New and used auto loans represented 28.8% of credit unions’ loan distribution?as of March 2011, down from 37% in 2005. The good news is that used auto loans represent the second largest share of credit unions’ loan portfolio at 18% in March 2011 and offer credit unions greater opportunities in pricing structures. Rate competition for new car buyers with good credit leaves little room for profitable margins, whereas used car borrowers with B and C credit offer more room to generate positive income. The key is to manage the risk prudently.
Total sales of new and used autos in 2009, according to the Bureau of Transportation Statistics were slightly over 46 million. Used car sales represented 77% of the total sales or just over 35 million.

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