Credit unions increased their market share of automotive loans, an indication of both their growing competitiveness and appeal to rate shoppers, according to Experian’s latest Automotive Finance Market report.

Experian calls the credit unions’ market gains “the biggest shift” as the data tracker compares 2016’s third quarter with the same time last year.

Experian also says an increase in prime lending and decrease in subprime financing should allay fears about alleged risky lending behavior.

Credit unions grew their share of the total loan market from 17.6% to 19.6%. For new-vehicle loans, credit unions increased penetration 22%, going from 9.9% to 12%.

The report says interest-rate increases played a key role in helping boost credit union share. Interest rates for the average new-vehicle loan went from 4.63% in 2015’s third quarter to 4.69% for the same period this year.

“Credit unions typically have the most competitive interest rates, so any time rates jump overall, it’s a natural reaction for credit unions to see a rise in their market share,” says Melinda Zabritski, Experian’s senior director-automotive finance. “With vehicle prices and loan dollar amounts rising, car shoppers are looking for any relief they can get. Credit unions’ traditionally lower rates are obviously an attractive option.”

In total vehicle financing (including new and used units as well as leasing), bank market share was up slightly (35.1% vs. 34.8%) in comparing this year’s and last year’s third quarters.

Losing market share were captive lenders (28.3% vs. 29.3%) and finance companies (10.7% vs. 12.1%).

Banks and credit unions have been at odds in recent years as the latter have become more involved in auto-financing across various credit-score segments. Banks say that violates credit union charters that are intended to prevent them from lending to auto consumers with relatively low credit scores.

Meanwhile, Experian says that despite lingering subprime-bubble rumors, the automotive-financing market continues to get stronger.

Loans extended to consumers in the subprime tier fell 4.5% from the previous year, and loans to deep-subprime consumers dropped 2.8% to the lowest level since 2011.

Newly originated loans to prime borrowers increased 2%, representing nearly 60% of auto loans financed in 2016’s third quarter.

That “provides a stark reality check” for auto analysts and industry observers who have been “making doomsday predictions about a subprime bubble,” Zabritski says.

Lenders are reducing the percentage of loans to the subprime and deep-subprime risk tiers while increasing the percentage to consumers with good credit, she says.

“The most important takeaway here is to understand the market reality and not to be led astray by rumors or unsubstantiated facts.

“By doing so, lenders, dealers and consumers are able to make smarter decisions and more easily explore financing programs and other opportunities available to them.”

Other third-quarter report highlights:

  • Total open automotive loan balances reached a record high of $1.055 billion.
  • Used-vehicle loan amounts reached a record high of $19,227, up by $361.
  • The average new-vehicle loan amount jumped to $30,022 from $28,936.
  • Share of new-vehicle leasing increased to 29.49% from 26.93%.
  • The average monthly payment for a new-vehicle loan was $495, up from $482.
  • The average new-vehicle lease payment was $405, up from $398.
  • The average monthly loan payment for a used vehicle was $362, up from $360.
  • The average loan term for a new vehicle was 68 months.