Companies in this industry provide sales financing for automotive purchases and leases. Major companies include Ally Financial, Ford Motor Credit, JPMorgan Chase, and Wells Fargo (all based in the US), as well as Banco Santander (Spain), Daimler Financial Services (Germany), and Toyota Financial Services (Japan).
Globalization and greater access to the internet are spurring companies to pursue growth internationally. Though the US and Europe are the two largest markets for auto financing and leasing, demand is growing in emerging markets. Demand for loans, as well as the rules and regulations governing lending practices, varies from country to country.
Auto lending and leasing accounts for about half of the US sales financing industry, which includes about 4,500 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $100 billion. As cars have become more expensive, the size of individual loans has risen: in 2019, the average new car loan in the US reached $30,958, according to Experian.
Demand is driven by interest rates, consumer confidence, and capital spending by businesses. The profitability of individual companies depends on their ability to originate, service, and collect loans and leases, as well as to collect fees and interest on financing products. Large companies have economies of scale in securing access to capital. Small companies can compete effectively by specializing. The US industry is highly concentrated: the top 50 companies account for more than 85% of revenue.
The US industry is dominated by large banks and carmakers' captive financing arms. Dealerships, credit unions, and independent finance companies also offer vehicle financing. Online lending platforms and alternative lending models are growing as competitive forces in the auto lending industry. Examples include all-digital leasing companies that let you apply for financing and shop for cars through a smartphone app, as well as peer-to-peer (P2P) online marketplaces that connect borrowers with individual credit investors.
Products, Operations & Technology
Major products are loans and leases, each of which accounts for about half of US auto lending revenue.
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms