Captive Finance Overtake Banks in 2017 Loan Originations, According to Report

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Captive finance companies saw an increase in auto loan originations in 2017 compared to last year, beating out most banks, according to a new report from CU Direct and AutoCount.

Toyota Financial Services reached to No. 2 in 2017, up from No. 6 in 2016, as its originations grew 41% to 1.1 million. American Honda Financial Corp. originations grew 77%, moving it to No. 6 from No. 8 a year earlier.

Meanwhile, Nissan Infiniti Financial Services’ originations climbed 47%, as it rose to No. 8 from No. 9 and Ford Motor Credit Co.’s originations increased 30% and remained at No. 7.

The No. 1 originator for auto loans were credit unions but as an aggregate collection of those on CU Direct’s network. However, originations still grew 16% to 1.8 million auto loans in 2017.

Meanwhile, banks like Wells Fargo, Ally, and Chase all saw originations drop. Wells Fargo Auto was No. 2 in 2016 but dropped to No. 9 in 2017 as its originations fell 47%. Previously, executives have said they expect auto loan volume to continue to decline through the next few quarters, but the overall loan quality will improve because the lender has tightened its underwriting criteria.

Capital One Auto Finance rose to No. 3 from No. 4, even though its originations slipped 2% and Ally switched places with Capital One, coming in at No. 4 for 2017 as its originations dropped 9%.

“We have seen the value of some competitors backing off in the auto business,” Richard Fairbanks, chief executive of Capital One Financial Corp., said on the 4Q17 earnings call. “What is happening is we’ve had an unusually benign period of competition in the 2016 and 2017 period. We will look back at that and say, ‘It normalized from there,’ and I think that it’s just a natural thing.”

Chase Auto Finance held onto its No. 5 ranking, even as its originations fell 2%.

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