Report: Georgians purchase more big ticket items, consumer confidence rising

Strong auto lending portfolios among Georgia's credit unions signal confidence continues to increase

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Highlights

  • New vehicle loans at Georgia credit unions increased 5.4 percent during 1st quarter, 2014
  • Used vehicle loans at Georgia credit unions grew 1.5 percent during 1st quarter, 2014
  • First mortgage loans at Georgia credit unions grew .5 percent during 1st quarter, 2014
  • Total loan growth at Georgia credit unions reached 5 percent during 1st quarter, 2014

Auto lending continues to shine at Georgia's credit unions as the not-for-profit financial institutions carried their strong 2013 lending results into the first quarter of 2014.

While overall loan growth at Georgia's credit unions slowed slightly in the first quarter of 2014 to 0.7 percent (2.8 percent annualized), likely a result of seasonality, loan growth continued to outpace savings growth at rates of 5.0 percent versus 2.5 percent, respectively over the 12 month period ending March, 2014.

"More Georgians back at work, continued low interest rates on consumer loans and a much improved housing market have all helped to rebuild consumer confidence," said Mike Mercer, president and CEO of Georgia Credit Union Affiliates (GCUA). "Consumers are more willing to take on those big ticket life purchases such as new cars and homes."

Automobile lending was the star performer of the loan portfolios during the three month period with new vehicles leading the charge. New vehicle loans showed a quarterly increase of 5.4 percent (21.5 percent annualized), approximately twice the growth rate recorded in 2013. Used auto loans as well as first mortgages also ended the quarter in the positive with quarterly gains of 1.5 percent and 0.5 percent respectively. That growth was offset by declines in both credit card/unsecured loans and second mortgages.

"It is not surprising that more Georgians are choosing to purchase new vehicles this year," explained Mercer. "The cost of owning a new car versus a late-model used car is not much different for some models, which clearly helps new car sales."

Georgia consumers' increased confidence in both labor and overall economic markets.

  • According to the Bureau of Labor Statistics, Georgia's March unemployment rate of 7.0 percent was a 0.4 percent decline from December.
  • Georgia's housing market continues to improve, recording its highest FHFA's purchase-only index reading in three years.
  • Georgia credit union borrower-bankruptcy filings continued their decline, falling by more than 17 percent in the year ended March 2014.

The current average rate on a 5-year home equity loan (70 percent LTV) at Georgia's credit unions now averages 0.47 percentage points lower than the comparable rate at the state's banking institutions. That means that on a $25,000 home equity loan, the credit union advantage saves the average Georgia consumer about $325 over five years.

"Georgia's credit unions continue to offer competitive financing advantages on a variety of consumer loans," noted Mercer. "More Georgians are turning to credit unions to take advantage of these low rates as well as the additional benefits of membership."

Despite the increased borrowing, Georgians are still managing to put away for a rainy day as balances in regular savings accounts rebounded by 3.9 percent in the first quarter of 2014. With little change in terms of the historically low interest rate environment, consumers again remained focused on short-term liquid accounts. Credit union checking account balances grew by 9.8 percent, while regular savings grew by 6.3 percent and money market accounts increased by 2.0 percent in the first three months of the year.

As in recent years, Georgia consumers are continuing to recognize the benefits of credit union membership. Total membership in the state's credit unions grew by 1.1 percent in the first quarter and by 2.7 percent in the year ending March 2014. In contrast, the Census bureau reports that the state population grew by 3.1 percent in 2013. Nationally, credit union membership is projected to hit 100 million later this summer. Georgia's credit union membership should hit two million at roughly the same time.

GCUA compiled the savings and lending data from March 2013 to March 2014 at 44 credit unions from across the state, representing 94 percent of credit union assets and 89 percent of members in Georgia.