F&I Managers Flock Back to Captive Finance Companies

Dealerships are flocking back to captive finance companies, which have gained their highest market share in almost 15 years while banks and credit unions have lost shares, according to just-released first-quarter auto finance results from Experian Automotive.
F&I managers are directing business to captives, right along with the twin comeback in new-vehicle inventory and factory-backed incentives. It’s a “ripple effect,” says Melinda Zabritski, Experian head of automotive financial insights.
Of course, incentives are a key advantage over banks and credit unions, except for some banks, which sometimes participate in manufacturers’ incentive programs because they provide captive finance-style services to OEM partners. Chase Auto Finance is a prominent example.
Leasing, another auto finance product dominated by captives and a few partner banks, is also making a comeback and is also fueled by factory-backed incentives, Experian says. This trend applies to electric vehicles in particular.
According to Experian Automotive, the captives’ new-vehicle financing share, including loans and leases, for the first quarter was 61.8%, up from 54.2% a year ago and the highest since 2010.
Bank new-car share was 20.7% for the quarter, down from 23.4% a year ago. Credit union new-car share was 9.7%, down from 17%.
Used-vehicle loans were a mirror image, with banks and credit unions virtually tied for No.1 at 28% share each in the first quarter. That dwarfs the captives, at 8.7% share in used, Experian reports.
Looking more closely at EV financing, Experian says EVs accounted for about 8.6% of new purchases for the quarter, with a lease share of 35.2%. Some new EVs must be leased, not purchased, to get the maximum $7,500 tax incentive.
For the entire U.S. market, leases accounted for 24.1% of new-vehicle volume in the first quarter, up from 19.3% a year ago, Experian says.