Automobile sales have been one of the key drivers of the U.S. economy for nearly a century. And one of the most important forces behind car sales is car financing.
According to a 2012 report by Experian, the total amount of outstanding car loans in the U.S. grew by $26.8 Billion from Q1 2011 to Q1 2012, a growth of only 4.19%. That may be low, but considering the near collapse of the entire American auto industry nearly four years ago, it a cause for optimism for many Americans.
When preparing to buy a new or used vehicle most consumers also prepare to finance that same purchase. Automobile lending is an important, if not often overlooked, part of buying a car. Sometimes consumers simply go to their own bank or, if they have less than perfect credit, maybe they go to a credit union or a finance company. But who are the top auto loan companies in the United States and which one is right for you?
According to the Experian report, “State of the Automotive Finance Market” for Q1 2012, most car buyers and car loan borrowers today prefer banks and credit unions for their car financing needs. Here are the market shares of the top automotive loan sources in Q1 2012:
Bank loans – 40.21%
Credit unions – 16.89%
Captive (manufacturer-financed) – 16.68%
Finance companies – 14.78%
“Buy Here Pay Here” (dealer-financed) – 11.44%
Regional and national banks issue their fair share of auto loans due to the sheer number of customers they have. Owning a significant amount of market share doesn’t necessarily mean they’re the best. However, many banks and credit unions are able to offer consistently competitive rates and terms on their auto loans – especially to good customers. There’s an extra reason for checking with a bank or credit union before going to dealerships. Walking into a dealership with approved car financing can strengthen the buyer’s position.
Getting a car loan at a dealership is certainly convenient, and savvy car shoppers may be able to secure better deals by using the dealer’s financing. Some dealers get a commission for arranging the financing on cars they sell. So in addition to the occasional low-rate incentive financing, some dealers may even give a break on the price of the car.
There are also automobile loan companies that specialize in just car financing. Auto loan companies can finance both used and new car purchases, as well as some car loan refinances. Many may also offer options for consumers with damaged credit and low down payment, as well as traditional loans for borrowers with pristine credit and hefty down payments.
Auto loan brokers are another player in the automobile finance industry. An automobile loan broker does not issue the loan itself but rather finds a competitive loan for a borrower from a selection of several loan companies.
Consumers do have many more options today for automobile financing. According to Experian, however, the top 20 auto loan providers accounted for nearly half of all car financing arranged in today. As of Q1 2012, the list of top 20 automotive finance sources was made up of the following providers:
Ally Bank – 6.39% market share
Wells Fargo – 5.71% market share
Chase – 4.85% market share
Toyota – 4.27% market share
Capital One – 4.09% market share
Ford – 3.41% market share
Honda – 2.92% market share
Bank of America – 2% market share
Santander – 1.78% market share
TD Auto – 1.67% market share
Nissan Infiniti – 1.64% market share
Fifth Third – 1.43% market share
US Bank – 1.27% market share
Americredit – 1.24% market share
Credit Acceptance – 1.09% market share
VW Credit – 1.06% market share
BMW Bank – 0.96% market share
Huntington – 0.94% market share
PNC Bank – 0.88% market share
RBS Citizens – 0.87% market share
If and as the automobile industry continues to recover and grow, the competition between these top auto loan sources (and others) will continue to heat up. That will actually be a good thing – for consumers.
The key for any car shopper, however, is to always shop around and compare. Many of these auto lenders post their interest rates online, though a quick phone call to a local branch may uncover special offers not posted on their websites. Most importantly, car shoppers should already have their car loan lined up before they step foot in any dealership. That pre-approval can be a powerful tool for leveraging lower sale prices and better dealership financing terms.
Now that you have enough details of the top finance companies, you can compare them & choose wisely when buying a vehicle for yourself.