Usually, when it comes to car loans and financing programs, customers go to a bank for the money. Well, it looks like the booming North American car market has made the automakers sensible to this segment as well.
US banks have a big competitor in recent years when it comes to car financing, the automakers. The companies have been long setting up their own financing divisions – which were tasked with many business strategies, including offering customer loans.
Credit data company Experian has found out that while last year in the US the automakers financing units made up 37% of all new car loans in the first quarter, the tally for the same period in 2014 went up significantly, reaching half of all new car loans. They are also responsible for almost all leases, which accounted for 26 of all new car sales in the period, growing from 20% in 2012 and 23% in 2013.
The automaker’s financing divisions, spurred by the healthy financial position of the companies in recent years, have moved to increase pressure on traditional auto loans from banks by providing new customers with lower monthly payments and extended terms.
For that reasons, banks like US Bancorp, for example, are now moving into grey areas like financing the used car sales or giving credit to not so creditworthy borrowers. Others, like Wells Fargo & Co, have moves to sign deals with the automakers themselves to leverage access to the nationwide dealer networks.