DETROIT–The share of the auto financing market held by credit unions and banks has declined as the captive financing companies gained ground, according to a new report.
Banks' market share ended 2023 at 24%, which is between the share held by the captives and credit unions, and was down from 25% in 2022, according to Experian.
“But (banks) had the largest share of the total loan market, followed closely by credit unions,” Automotive News reported, citing the Experian data. “Captives had the third highest loan market share but were up about five points from the end of 2022.”
Driving the Shift
A return of captive finance incentives is likely driving the shift in market share, Melinda Zabritski, Experian's senior director of automotive financial solutions, told Automotive News. She added that with interest rates still high, captives with automaker backing are in a “unique place” to compete. "We are certainly seeing the captives with rates that are lower than all the other lender types as a whole," Zabritski told the publication.
According to Automotive News, the return of incentives is primarily beneficial for customers with higher credit scores who can qualify for the programs. And the incentive rates are not so low that they can entice people who can afford to pay cash, Zabritski told Automotive News.
In 2023, the average cash penetration rate for internal combustion engine vehicles was more than 18%, the Experian data show.
The Forecast
According to the report, captives' market share is several percentage points above where it was in 2019 at 26.2% of total financing. Pent up new-vehicle demand has likely elevated that market share further, Zabritski told Automotive News, predicting that as pent-up demand is satisfied, the captive share may drop a few percentage points.
Now With Free Shipping! The CUToday.info Daily News Email Keeps Getting Better!
The biggest, best and freshest news reporting in credit unions remains free, and now has an added bonus---free shipping to your email address! That’s right. Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?