Captive finance companies seem to dominate auto lending because individual captives are so big. There are some giant banks in auto lending too, such as Chase Auto Finance in new vehicles and Wells Fargo Dealer Services in used.
But smaller banks are more numerous, and those small numbers add up. In the first quarter, banks had a 40 percent share of loans and leases vs. about 17 percent each for captives and credit unions, according to Experian Automotive.
Ally Financial, the No. 1 U.S. auto lender overall, also is a bank, even though it resembles a captive in some ways because it’s the preferred lender for General Motors, Chrysler and others. But even if you took Ally’s 6 percent share of the market and put it in the “captive” column, banks still dominate by a wide margin.
Regional lenders such as Huntington Bank in Columbus, Ohio, have some advantages, according to Rich Porrello, director of Huntington Auto Finance. Porrello said in a recent interview that customers in the bank’s Midwest footprint live close to branch offices, and many have other accounts with the bank besides an auto loan.
The same argument could apply to dealers. Dealers at auto finance conferences often complain about banks jumping in and out of auto lending. But dealers also emphasize the importance of personal relationships. Dealers may not always admit it, but that often means the banker right down the street.