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Captive finance companies picked up share in the second quarter, buoyed by a rise in leasing -- a lending area they dominate - and gains in new-vehicle loans.
Captives had the biggest share of new-vehicle loans in the quarter, and banks were No. 2. A year earlier, the opposite was true.
"The captives clearly have a stranglehold" on new-car loans, said Mike Buckingham, senior director of the auto finance practice at J.D. Power and Associates.
"And with few exceptions -- a couple of banks in partnership with the OEMs -- they're providing all the leases. Leasing has really been a captive gain."
Industrywide, Buckingham notes an increase in subprime, banks going after used-vehicle business, low interest rates and easier credit.
"All these forces together are making things pretty good for the dealer," he said.
Leases on the rise
Experian Automotive reported this week that lease penetration in the second quarter was 27.6 percent of new-vehicle retail volume. That barely topped the first quarter's 27.5 percent, but it was enough to qualify as the highest level since Experian started keeping track in 2006. It was also a substantial increase from the second quarter of 2012, when lease penetration was 24.4 percent.
According to Experian, eight of the top 10 lenders in leasing in the second quarter, ranked by market share, were captive finance companies. American Honda Finance and Toyota Financial Services were Nos. 1 and 2, respectively.
The exceptions were No. 4 Ally Financial Inc., which is a preferred lender for General Motors, and No. 10 Chase Auto Finance, which provides private-label loans and leases for Jaguar Land Rover, Subaru of America and Mazda North American Operations.
Higher lease penetration is good for automakers, dealers and lenders because lease customers on average come back to the market for a new car more often. They also tend to be more loyal to the same manufacturer and dealership. In addition, they are more loyal to their dealership service department because their vehicles are under warranty.
In the second quarter, captives and banks nearly swapped positions in new-vehicle loans, compared with the same 2012 period, Experian data show.
Captives' share of new-car loans in the second quarter was 48.3 percent, up from 36.1 percent a year earlier. Banks had a new-vehicle loan share of 35.9 percent in the second quarter, down from 46.2 percent a year earlier.
According to Experian, Honda Finance jumped to No. 1 in new-vehicle loan volume from No. 4 a year ago, overtaking Ally Financial Inc., which was No. 1 a year ago.
Among all used-vehicle loans, banks had the biggest share at 36.4 percent, followed by independent finance companies at 21.5 percent, and credit unions at 20.1 percent.
Wells Fargo Dealer Services, the perennial leader in used-vehicle finance, was No. 1 in used-vehicle loan share for the quarter as well as tops in new and used vehicle loan share combined for the quarter.
The U.S. auto market is becoming extremely competitive, said Dave Foerster, general manager of Equifax Automotive Services in Atlanta.
"The captives remain aggressive," he said in a phone interview last week. "Banks, finance companies, credit unions -- really everyone -- is extremely aggressive."