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Automobile lending reached its highest level ever at the end of the third quarter while showing few signs of credit weakness, the credit bureau Experian reported Wednesday.
November 4 -
The auto lender has changed the way it calculates its closely-watched provision for credit losses, a move that added to third-quarter profits and raised questions about the transparency of its loan book.
October 29 -
The Consumer Financial Protection Bureau has struggled internally with how to end potential discrimination in auto lending, including debating whether it should cite a large lender in the hopes of effectively ending the ability of partnering dealers to mark up loans with all lenders.
September 24
Banks are losing auto finance market share to captive lenders and finance companies, according to a new report from the credit bureau Experian.
Banks made 34.7% of all auto loans in the third quarter, down from 35.4% a year ago, while both captive lenders and finance companies increased their shares, according to the Experian auto finance report, which was released Wednesday.
Captives – the lending companies owned by automakers – were particularly strong in new-car loans, a market in which they have nearly regained the ground they lost during the recession. They made 52% of new-car loans on the quarter, up from 50% a year ago, while banks made 33.7%, down from 34.5% in last year's third quarter.
It's the strongest showing for the captives since the financial crisis, Experian said.
"Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession," Melinda Zabritski, director of automotive finance at Experian, said in the news release.
Experian's report shows a continuation of two trends that will surprise no one who has been watching the auto finance market in recent years: car buyers are increasing their use of financing, and banks and other lenders are stretching loan terms.
Eighty-seven percent of new cars and 55% of used cars were bought using financing in the third quarter, both all-time highs. As car prices continue to rise, customers are also increasing their reliance on leasing in order to keep their monthly payments down. Twenty-seven percent of all new-car transactions were leases, the highest percentage ever and up from 25% a year ago.
Meanwhile, lenders are stretching loans more than ever as car prices rise. The percentage of customers taking out five- or six-year loans hit an all-time high. Longer leases rose even faster – leases of six to seven years hit all-time highs both for new cars (28%) and used cars (16%).
Banks are also extending more loans to riskier buyers. Banks financed 9.6% of new-car purchases for the riskiest slice of customers, those with credit scores below 600, up from 8.8% a year ago.
