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Captives Taking Lead In Auto Finance Industry-Wide Recovery

A few aspects of the American economy are showing life. Retail sales of new cars and light trucks are climbing and, along with them, auto financing. This upsurge is much stronger with captive lenders, in particular subprime auto loan companies, because they suffered the most losses during the recent recession.

A recent Equifax report really drove the point home. ”When we look at what’s going on in automotive, you see a tremendous amount of growth coming from a specific area. It’s coming from the captives,”  senior vice president of special client services for Equifax, Michael Koukounas, was quoted as saying.

According to Equifax’s numbers, auto originations for the captives increased 47 percent when comparing July 2011 over July 2009. Koukounas said the captive auto financiers have been more willing to reenter the subprime lending arena than more traditional banks. Loans to subprime borrowers account for 38.5 percent of originations for the captives finance companies compared to just 17.6 percent for banks and credit unions.

Many of the captive finance companies are making better quality loans than they were prior to the 2008 financial meltdown. That is helping keep delinquency rates low. Hopefully, this will lead to a spark being lit in the American economy.