Auto Finance Industry

Part
01
of three
Part
01

Market Size - Auto Finance Industry: United States

The US auto finance industry had a market size of $1.2 trillion in 2019. Additional data on this market has been outlined below.

FINDINGS

  • In 2017, the market size of the US auto finance industry was $1.2 trillion.
  • Currently, almost 50% of US adults rely on a loan to finance their vehicle purchase.
  • The total number of car loan accounts in the US was 108.66 million in 2017.
  • Auto loans make up 9.28% of debt that people in the US owe.
  • In the US, most people who buy their vehicles at dealerships prefer financing these vehicles with banks by securing a loan.
  • Banks in the US had $368 billion in "open car loans" in 2017 while credit unions had an open auto balance of $313 billion.
  • The delinquencies in the US auto lending sector keeps increasing. Currently, serious delinquencies account for roughly 4.7% of the "total outstanding in the first quarter of 2019."

RESEARCH STRATEGY

In order to provide the requested data on the market size of the US auto finance industry, we first relied on market research reports by companies like Ibis World. However, these market research reports only provided the global market size of the industry. Next, we turned to data intelligence platforms like Statista but we only found outdated information. We then examined financial news resources including Financial Times and Wall Street Journal among many others. Upon examining them, we found that they used the terms "auto loans" and "auto finance" interchangeably perhaps due to the fact financing a vehicle requires a loan in most cases. As such, most of our findings refer to auto loans. The market size of the auto finance industry, however, was found in several of these articles. While one article provided the figure as the market size of the US auto finance industry, another, referred to it as the size of the US auto loans market
Part
02
of three
Part
02

Top Companies - Auto Finance Industry

The top five companies in the US auto finance industry are Ally Financial, Capital One Auto Finance, Wells Fargo Auto Loans, Chase, and Toyota Financial Services. These companies have a collective market share of 26.05%.

US AUTO FINANCE MARKET AT A GLANCE

  • At 30.7%, banks in the US such as Chase have the largest share of the auto finance market closely followed by captive lenders like Toyota Financial Services at 30.6%.
  • Credit unions like Alliant Credit Union have a 21.3% share while finance companies - such as RoadLoans by Santander Consumer USA - have an 11.2% share, and BHPH (Buy here, pay here dealerships) have the least share at 6.1%.
  • By market share, the top auto finance companies in the US are Ally Financial, Wells Fargo, Chase, Capital One, and Toyota Financial Services.
  • Others include Ford, Nissan Infiniti Financial Services, Santander Consumer USA, Honda, and Bank of America.

ALLY FINANCIAL

  • Also known as Ally Auto Finance, Ally Financial has a 5.75% share of the US auto finance industry.
  • Ally Financial prides itself in the fact it is the oldest company in the auto finance industry. It has been in the auto finance industry for over a hundred years. According to the company, this means it has more experience catering to dealerships and customers than competitors.
  • The company also has a large network of dealers. It current serves more than 18,000 dealers in the US.

Capital One Auto Finance

  • Capital One Auto Finance has a 5.74% share of the US auto finance industry.
  • Capital One's value proposition is that it offers several tools which allow people to check rates and see if they pre-qualify for an auto loan with no impact on their credit score.
  • One of its tools is an auto loan calculator. This allows people to figure out what their monthly payment/loan amount will be and see what works for them.
  • Its loan terms can include "the price of the car as well as the tax, title and other relevant fees" thus lowering the total out-of-pocket cost of its users.
  • The company has a network of 12,000 dealers in the US.

WELLS FARGO AUTO LOANS & FINANCING

  • Wells Fargo has a 5.66% share of the US auto finance industry.
  • Wells Fargo offers competitive rates and terms and 24/7 access to statements and mobile alerts. This means auto finance payments can be seen online without calling a dealership or their customer service team.
  • Compared to competitors, Wells Fargo makes the auto finance process easier for borrowers by offering private party purchases without a dealership as the middle man.
  • Wells Fargo also claims auto loan funding can be received on the same day compared to other auto finance companies which can take up to a month.
  • It has a network of more than 11,000 dealers in the US.

CHASE

  • Chase has a 4.97% share of the US auto finance industry.
  • Although Chase has stringent auto finance terms, it boasts of its easy online application process and the fact that it offers auto loans to customers in all 50 US states.
  • Chase has also partnered with some car manufacturers including Mazda and Subaru. This makes it a lot easier for consumers wanting to buy these vehicles to get loans.
  • In addition, it has no loan origination fee and offers customers a "guaranteed discount on new vehicles at participating dealerships."

TOYOTA FINANCIAL SERVICES

  • Toyota Financial Services has a 3.93% share of the US auto finance industry.
  • Toyota Financial Services offers a wide range of special financing programs.
  • With Toyota Financial services, borrowers can apply for preapproval online.
  • Compared to other auto finance companies - which will only take borrowers with a credit score of over 650, Toyota Financial Services claims its value proposition lies in its willingness to "consider borrowers with limited credit histories."

RESEARCH STRATEGY

In order to provide the top auto finance companies in the US and their value proposition, we first relied on market research reports by companies like Ibis World - to figure out the companies. While these market research reports mentioned Ally Financial and Chase Auto Finance as some of the companies dominating the industry, they did not provide the market share of these companies. Next, we turned to data intelligence platforms like Statista but we only found outdated information.

We then examined financial news resources including Super Money among many others. Upon examining them, we found that they used the terms "auto loans" and "auto finance" interchangeably perhaps due to the fact financing a vehicle requires a loan in most cases. As such, most of our findings refer to auto loans. In addition, these financial news platforms referenced an Experian study done on the state of the US automotive finance market. The study was published in 2018 but some of the data provided there is outdated. We located the top auto finance companies but the market share provided was from 2016. We attempted finding more recent data by reviewing the annual reports of these companies but they only provided their market share of the finance industry in general not the auto loans/finance industry. We also tried estimating a more recent market share by compiling their auto finance revenue. However, these companies only provided aggregate revenues. As such, we provided each company's 2016 market share. The value proposition of these companies was gathered from the missions and values they outlined on their websites. Statements made by their executives have also been used for their value proposition. The website of each company is hyperlinked to their name.
Part
03
of three
Part
03

Top Companies - Auto Finance Industry: Competitive Landscape

Ally Financial, Capital One Auto Finance, Wells Fargo Auto Loans, Chase, and Toyota Financial Services mainly target millennials perhaps because this generation is immensely interested in building their credit and auto financing is one of the many ways they can do that. These companies have a mix of positive and negative reviews.

ALLY AUTO FINANCE

Capital One Auto Finance

WELLS FARGO AUTO LOANS & FINANCING

CHASE

  • Based on its recent marketing, digital services and tools for auto loans, it appears Chase mainly targets millennials.
  • Chase Auto Preferred "connects customers to local dealers, offering discount pricing and a pressure-free [auto finance] experience." Its auto loans are through its network of dealerships.
  • It also has new or used car auto financing options, as well as, the option to refinance existing car loans.
  • It is rated 4.2 out of 5 of Top Ten Reviews and 4.1 out of 5 on Best Company based on 35 user reviews.
  • Its pros include the co-signer options it offers, discounts for customers that have a checking account with them, and a loan calculator. Its cons include restrictions on the type of vehicles it will finance and lack of transparency.

TOYOTA FINANCIAL SERVICES

  • Toyota Financial Services targets all working class Americans including millennials, Gen Xers, and baby boomers.
  • The company offers different auto financing options for different people. Its College Grad Program is a special auto finance program for college grads.
  • Others include Military Rebate and Repeat Customers. Borrowers can either lease a car, buy one, or use the balloon finance plan.
  • Toyota Financial Services is rated 3.5 out of 5 based on 329 reviews on Consumer Affairs.
  • Borrowers say it has vehicle and dealership limitations. Its pros are it considers people with a below average credit score and has special financing programs.

RESEARCH STRATEGY

In order to get the target audience and services each of the auto finance companies offers, we first examined their websites. In a few cases, we had to expand our research to the annual reports of these companies and news articles published by Hitwise and Reuters among others. Chase and Toyota Financial Services did not provide any information on their target audience. As such, we combed through their most recent marketing and services. Through this, we were able to figure out their target audience. Reviews were found on review sites like Consumer Affairs.
Sources
Sources

From Part 03