Automobile sales have been one of the key drivers of the U.S. economy for nearly a century. And one of the most important forces behind car sales is car financing.
When preparing to buy a new or used vehicle, most consumers also prepare to finance that same purchase. Auto sales climbed to a record high last year, prompting almost $1 trillion to be borrowed through financing for new cars and trucks.1 Automobile lending is an important, if not often overlooked, part of buying a car. Sometimes consumers simply go to their own bank or, if they have less than perfect credit, a credit union or a finance company. But who are the top auto loan companies in the United States and which one is right for you?
How to Choose the Best Auto Lender for You
According to the Experian report, “State of the Automotive Finance Market” for Q1 2016, most car buyers and car loan borrowers today prefer banks and credit unions for their car financing needs. Here are the market shares of the top automotive loan sources in Q1 2016:
- Bank loans – 34.8%
- Credit unions – 18.0%
- Captive (manufacturer-financed) – 26.2%
- Finance companies – 13.4%
- “Buy Here Pay Here” (dealer-financed) – 7.7%
Regional and national banks issue their fair share of auto loans due to the sheer number of customers they have. However, owning a significant amount of market share doesn’t necessarily mean they’re the best. Many banks and credit unions are able to offer consistently competitive rates and terms on their auto loans — especially to good customers. There’s an extra reason for checking with a bank or credit union before going to dealerships. Walking into a dealership with approved car financing can strengthen the buyer’s position.
Getting a car loan at a dealership is certainly convenient, and savvy car shoppers may be able to secure better deals by using the dealer’s financing. Some dealers get a commission for arranging the financing on cars they sell. So in addition to the occasional low-rate incentive financing, some dealers may even give a break on the price of the car.
There are also automobile loan companies that specialize in just car financing. Auto loan companies can finance both used and new car purchases, as well as some car loan refinances. Many may also offer options for consumers with damaged credit who can only afford low down payment, as well as for borrowers with pristine credit who are able to make I would ssu hefty down payments.
Auto loan brokers are another player in the automobile finance industry. An automobile loan broker does not issue the loan itself but rather finds a competitive loan for a borrower from a selection of several loan companies.
Top 20 Auto Loan Companies in U.S.
Consumers today have many options for automobile financing. However, the top 20 auto loan providers account for nearly half of all car financing, according to Experian. As of Q4 2015, the list of the top 20 automotive finance sources was made up of the following providers:
|10||Bank of America||1.84%|
|19||Kia Motor Finco||0.83%|
As the automobile industry continues to recover and grow, the competition between these top auto loan sources (and others) will continue to heat up. That will actually be a good thing for consumers.
The key for any car shopper, however, is to always shop around and compare. Many of these auto lenders post their interest rates online, though a quick phone call to a local branch may uncover special offers not posted on their websites. Most importantly, car shoppers should already have their car loan lined up before they step foot in any dealership. That pre-approval can be a powerful tool for leveraging lower sale prices and better dealership financing terms.
1LeBeau, P. (2016, February 09). Subprime auto loans, delinquencies up: Experian. Retrieved August 30, 2016, from http://www.cnbc.com/2016/02/09/subprime-auto-loans-delinquencies-keep-rising-experian-report-shows.html