Industry Analysis

The US Auto Loan Market Study

0

Trends in the US Auto Loan Market

Using machine learning and AI for auto lending and moving towards rideshare, subscription, and shared-ownership car loan models are two major trends being witnessed in the US auto loan market. Whereas auto lenders have integrated machine learning and AI into their existing IT infrastructure and are seeing the positive results, the movement towards rideshare, subscription, and shared-ownership car loan models is gradually taking shape and is expected to come to fruition in a few years. These two trends are discussed below.

1) Using Machine Learning and Artificial Intelligence for Auto Lending

  • A major trend in the US auto loan market is the growing use of machine learning and artificial intelligence (AI) algorithms to underwrite and structure auto loans.
  • The traditional days of overhauling the entire IT strategy and infrastructure of the lender to integrate the machine learning and AI features in the system are long gone. Currently, “lenders can easily leverage this innovative technology in the cloud with help from experienced” loan origination software (LOS) vendors.
  • Machine learning and AI “enable auto lenders to assess risk and identify ideal borrowers with incredible accuracy. This technology learns from historical data to predict the likely outcome of any given loan.”
  • Auto lenders can utilize the technology to determine whether the potential borrower is likely to be a fraud or delinquent, to assess and determine the creditworthiness of an individual, to calculate collateral value, to identify target audiences for auto loans, to conduct customer surveys to find hidden system bottlenecks, to predict customer behavior, and to “track capture ratios and approval rates to meet key performance goals.”
  • According to ZestFinance, auto lenders that use machine learning underwriting reduce losses by 23% annually by predicting risks more accurately.
  • Bank of America has utilized robotic process automation (RPA) technology by deploying robots that help to improve the accuracy, speed, and consistency of automated processes and also bring about significant cost savings for the bank. Bank of America has used RPA for operations like mortgage, auto lending, and vehicle servicing.
  • The United Services Automobile Association (USAA) uses AI for fraud detection and prevention and AI-enabled chatbots for providing better customer service.

2) Moving Towards Rideshare, Subscription, and Shared-ownership Car Loan Models

  • The traditional model of auto loans involves customers financing cars from a single lender. However, this model does not work for all customers, “especially those who rarely drive or subprime borrowers who cannot afford a traditional car loan.”
  • People living in large cities in the US often feel hampered by a scarcity of parking spaces, growing traffic that discourages residents from driving, and low diversity in car loan options. “For these reasons, many city residents are looking to provide rideshare services, move to a subscription lending model, or even share car ownership.”
  • Rideshare services enable “car owners to provide rides to people who do not own cars in exchange for payment.” Since rideshare cars are used more frequently than personal cars and are at a higher risk of damage, auto financing companies must provide rideshare-specific auto loans for customers who provide rideshare services. Currently, this model is in its inception stage and there are very few auto finance companies that provide loans to rideshare drivers. Stilt is a San Francisco-based financial technology company that provides auto loans to Lyft drivers.
  • A subscription lending model is a car loan in which the customer pays a fee to drive a vehicle that is owned by a third party. Rather than targeting individual borrowers, lenders can instead support this model by offering auto financing to these third-party subscription companies.” Currently, car subscription services are provided by third-party leasing companies like Fair, Borrow, and Hertz, and automakers like Porsche, Volvo, Mercedes-Benz, Audi, BMW, and Nissan. Flexdrive is a financial technology company that provides subscription car loans to customers. The captive lender Ford Credit is “tapping into new revenue streams while catalyzing growth in vehicle subscription.”
  • “A shared-ownership model is a car loan in which multiple customers own the same vehicle.” This model is also in its infancy as auto financing institutions are still deliberating the structure of the loan from a monetary and legal standpoint.

Recent Happenings in the US Auto Loan Market

There has been significant movement over the years in the US auto loan market. Increase in the size and share of auto loans, increase in delinquency rates on outstanding loans, increase in vehicle financing, and an increase in average credit scores for new auto loans are some interesting shifts witnessed in the past few years. Also, the COVID-19 pandemic that has led to severe unemployment in the US has caused a decline in auto sales, particularly in the months of April 2020 and May 2020.

1) Auto Loans Have Increased Over the Years

Total consumer debt balance
  • According to Equifax, the total outstanding balance on US auto loans and leases as of August 10, 2020, was $1.368 trillion. The total number of outstanding auto loan accounts was 89.8 million.
Outstanding Loans and Leases

2) Delinquency Rates on Outstanding Auto Loans Have Increased Over the Years

  • Equifax data also shows that “delinquency rates on existing auto loan balances” have increased over the years and are currently close to the highs seen during the Great Recession post 2008. The increase in delinquency rates is due to the increase in subprime auto lending over the years and massive unemployment due to the COVID-19 pandemic.
Delinquency Rates
  • Considering the increased delinquency rates, it is no surprise that “banks have sharply tightened their underwriting criteria for auto loans.” According to data received from the ‘Board of Governors of the Federal Reserve System,’ banks have reported a 55% increase in stringent requirements in Q3 2020.
Stringent requirements

3) Delinquency Rates Are Highest Among Subprime and Younger Borrowers

  • Data from Equifax shows that delinquency rates on auto loans are highest among subprime borrowers, i.e., borrowers with credit scores below 620. The delinquency rates fall as credit scores increase.
Subprime Borrowers
  • Study conducted by Equifax also shows that “borrowers under 30 are 50% more likely to default on their auto loans than those in their 30s. And borrowers in their 30s are nearly twice as likely to flow into serious delinquency than borrowers in their 40s.”
Younger Borrowers

4) Vehicle Financing Has Increased Over the Years

  • According to Experian’s ‘State of the Automotive Finance Market Q2 2020’ report, vehicle financing in the US has steadily increased over the years. The “percentage of vehicles by model year with financing” are as follows: 73.18% in 2017, 73.98% in 2018, 79.18% in 2019, and 85.20% in 2020.
Financing
  • Experian data also shows that full-sized non-luxury pickup is the most financed vehicle segment in the US commanding a 16.09% share of the US auto loan market. Small non-luxury SUV is the second-most financed vehicle segment (14.33% of the auto loan market).
Vehicle segments

5) Fall in Auto Sales Due to COVID-19

  • The COVID-19 pandemic has led to a decline in auto sales in the US across all vehicle segments. Data from Cox Automotive shows a 20% fall in US auto sales in August 2020 compared to August 2019. “Some of this decrease in purchase volume is likely due to fewer consumers’ ability to qualify for a loan.”
Fall in Auto Sales
  • Experian’s ‘State of the Automotive Finance Market Q2 2020’ report shows a similar trend with April 2020 and May 2020 the hardest hit months in terms of purchase volume.
Fall in Purchase Volume

6) Average Credit Scores for New Auto Loans Have Increased Over the Years

  • Data from Equifax has shown that average credit scores for new auto loans have increased over the years.
Average Credit Scores
  • Experian’s ‘State of the Automotive Finance Market Q2 2020’ report shows a similar trend. The average new credit scores for new leases over the years are as follows: 716 in 2016, 722 in both 2017 and 2018, 724 in 2019, and 729 in 2020. The average credit scores for new auto loans over the years are as follows: 708 in 2016, 711 in both 2017 and 2018, 713 in 2019, and 718 in 2020.
Average new credit scores

7) Prime Borrowers Drive the Auto Loan Market in the US

  • According to data from the Federal Reserve Board, 77% of the total auto debt in the US is associated with “prime borrowers who are paying more than ever for new and used cars.” Hence, prime borrowers drive the US auto loan market.
Prime vs Subprime
  • Even though prime borrowers considerably outweigh subprime borrowers, the distribution is not spread evenly across different credit sources. “Half the outstanding loans owned by auto finance companies were originated by subprime borrowers. In contrast, small banks and credit unions only have 14% of their auto loan balances invested in subprime borrowers.”
Prime vs Subprime Borrowers by Credit Source

8) Auto Loan Financing in Different States

  • According to Experian’s ‘State of the Automotive Finance Market Q2 2020’ report, Michigan and the Northeastern states in the US “have the greatest share of new state financing as lease.” Michigan leads with 70.1%, while notable Northeastern states are Connecticut (64.2%), New York (63.7%), and New Jersey (60.3%).
Michigan and the Northeast
Tennessee

Fintechs/Disruptors in the US Auto Loan Market and Their Auto Loan Features/Case Studies

OpenRoad Lending, eLEND Solutions, AutoFi, Inc., MotoRefi, Inc., AUTOPAY, Vroom, Gravity Lending, and iLendingDIRECT are some fintechs that have disrupted the US auto loan market to an extent. These companies have focused on providing auto loans and/or refinancing with attractive features to customers with low credit scores and low incomes, building an extensive network and partnership with lenders, dealerships, and OEMs, and digital transformation to leverage the growing customer preference for online vehicle purchasing models. The working methodologies employed by these companies to attract and retain customers and/or case studies of digital transformation achieved by these fintechs are presented below.

1) OpenRoad Lending

  • OpenRoad Lending is a Dallas Fort Worth-based auto finance company that was founded in 2009. The company refinances auto loans of customers at low interest rates and monthly payments and helps them save more than $100 per month on average.
  • OpenRoad Lending has been accredited with an A+ rating by the Better Business Bureau (BBB). It is a member of the American Financial Services Association and has been “recognized by Inc. Magazine as the 37th fastest growing private company” in the US.
  • OpenRoad Lending has emerged as a disruptor in the US auto loan market because it provides easy and secure refinance options from the comfort of one’s home at no additional cost or obligation for all credit types. “Quick loan decisions, flexible financing options, and cutting edge technology” provide a great customer experience. OpenRoad Lending has a 98% customer satisfaction rating.
  • OpenRoad Lending provides attractive auto loan refinancing features like low credit score (starting from 550), auto loans from $7,500 to $100,000, fast processing and approval, no loan origination fee, long loan terms (from 36 to 84 months), interest rates between 1.9% APR and 24.9% APR, low minimum income (starting from $18,000), high mileage on vehicles (up to 140,000 miles), consideration of older vehicles (up to 10 years), and acceptance of co-borrower applications. OpenRoad Lending provides auto refinance in 41 states and Washington, D.C.
  • OpenRoad Lending has integrated the e-signing software of eOriginal, Inc., digital transaction management expert, to its own platform to “improve its customer experience and increase the efficiency, compliance, and security of its business and loan management processes.” This integration has helped the lender to significantly reduce human errors while signing auto refinancing or new loan agreements and reduce unnecessary costs.
  • OpenRoad Lending has focused on achieving an extensive digital transformation to leverage its reputation as a disruptor in the US auto loan market. The company partnered with Plasma Computing Group to redesign its website “and make it SEO friendly by developing and implementing a new digital strategy to build the site’s overall trustworthiness, credibility, and professionalism.”

2) eLEND Solutions

  • eLEND Solutions, also known as DealerCentric Solutions, is a private automotive fintech company that provides a “simplified vehicle purchase process for the retail automotive industry.” The company was founded in 2003 and is headquartered in Orange County, California.
  • eLEND Solutions provides “online and in-store digital credit, identity, and finance” automotive solutions to customers. eLEND Solutions works with top auto dealership groups in the US like Penske Automotive, Berkshire Hathaway Automotive, Hendrick Automotive Group, Asbury Automotive Group, Ken Garff, and Wilson Automotive and provides dealership financing options to customers.
  • eLEND Solutions has emerged as a disruptor in the US auto loan market because it supports all major CRM, digital retailing, inventory, finance, and website platforms, its platform supports all lenders, programs, and credit tiers, and its system has “advanced credit filtering and calculation logic for all makes, all models, new and used, all terms and all credit tiers.”
  • eLEND Solutions is associated “with more than 3,000 dealerships representing all brands and is integrated with all major CRM platforms. eLEND Solutions is partnered with Acuant to provide a secure way to capture and verify ID information as early in the car sales process as possible.” Thus, the focus of eLEND Solutions to eliminate ID fraud in all its transactions has helped it emerge as a major disruptor in the market.
  • eLEND Solutions has signed a major partnership with Digital Motors, the premier online store for car dealerships, “to facilitate an integrated auto buying and financing experience” for customers. The integration enables car buyers to directly purchase from the website of the dealership and simultaneously apply for auto loan finance or leasing options.

3) AutoFi, Inc.

  • AutoFi is a San Francisco-based “e-commerce software platform that allows car buyers, for the first time, to purchase and finance a car entirely online. AutoFi’s platform connects an auto dealer’s customers to a network of lenders, providing a fast, mobile-first checkout experience.” The company was founded in 2015.
  • AutoFi works with several reputed lenders like Bank of America, Chase Auto Finance, Ford Motor Credit, Santander Consumer USA, Southeast Toyota Finance, and Huntington. The company provides customized digital auto retail solutions to customers. AutoFi has been ranked #1 in “2020 Dealers’ Choice Awards for digital sales and financing.”
  • AutoFi’s ecommerce platform “is built for digital automotive sales by integrating with a dealer’s existing website and supporting its current business processes. Vehicle buyers apply for financing, receive real-time offers from lenders, and select vehicle protection products to finalize a deal digitally, providing almost entirely touchless vehicle sales no matter how or where the sale process began.” The consumer focus on digital-only low-touch car purchase experience due to the COVID-19 pandemic has helped AutoFi expand its customer base by 125% in 2020 alone.
  • AutoFi has partnered with AutoAlert, the digital car sales platform, to “create an integrated software solution to provide dealerships with all the tools they need to streamline and complete customer vehicle sales online.” The new integration will enable vehicle buyers to complete their purchase online and remotely without needing to visit the car dealership.
  • AutoFi has also expanded “its purchase experience to facilitate more in-person transactions and to be more configurable across different franchise dealerships.” AutoFi has also taken steps to expand its OEM and dealership network to provide a greater variety of choices to customers.

4) MotoRefi, Inc.

  • MotoRefi is a fintech startup that refinances auto loans of customers at low interest rates (starting from 1.49% APR) and monthly payments and helps them save $101.02 per month on average. The company was founded in 2016 and is headquartered in Arlington, Virginia.
  • Besides auto refinance, MotoRefi provides auto insurance, extended vehicle protection, car key replacement coverage, and cosmetic care package for cars. MotoRefi has been accredited with an A+ rating by the Better Business Bureau (BBB). It has partnered with Equifax, DocuSign, CARFAX, and the National Automobile Dealers Association (NADA).
  • MotoRefi has emerged as a disruptor in the US auto loan market because its secure, digital platform enables “customers to see exactly how much they can save and complete the refinance process quickly, all from the comfort of their home.” MotoRefi provides peace of mind to its customers by paying off the old lender and re-titling the vehicle. MotoRefi has received financial backing from venture capital investors like Accomplice, QED Investors, and Motley Fool Ventures.
  • MotoRefi has scaled up its operations by adding new partners and lenders. The company has also launched “separate pilot programs with Progressive and Chime. Under these pilots, Progressive and Chime will directly offer refinance options to their customers in addition to working with affiliate programs such as Credit Karma.”

5) AUTOPAY

  • AUTOPAY is a lender marketplace that provides auto refinancing at low interest rates and low monthly payments and new car loans to customers. The company was founded in 2007 and is headquartered in Denver, Colorado. AUTOPAY has been accredited with an A+ rating by the Better Business Bureau (BBB).
  • AUTOPAY has emerged as a disruptor in the US auto loan market because its “national network of lending partners” and its online platform offers the full spectrum of auto financing and refinancing to its customers, thereby saving them money, time, and unnecessary visits to car dealerships. AUTOPAY has an approval rate of 94% and a capture rate of 47%.
  • AUTOPAY provides attractive auto loan refinancing features like low credit score (starting from 600), auto loans from $2,500 to $100,000, fast processing and approval, no loan origination fee, no prepayment penalty, long loan terms (from 24 to 84 months), interest rates between 1.99% APR and 17.99% APR, low minimum income (starting from $24,000), high mileage on vehicles (up to 125,000 miles), consideration of older vehicles (up to 11 years), and acceptance of co-borrower applications. However, AUTOPAY charges a late fee. AUTOPAY provides auto refinance in all the 50 states and Washington, D.C.
  • AUTOPAY provides attractive new auto loan features like low credit score (starting from 620), auto loans from $2,500 to $100,000, fast processing and approval, no prepayment penalty, long loan terms (up to 84 months), interest rates between 1.99% APR and 15.99% APR, low minimum income (starting from $24,000), and acceptance of cosigner applications. However, AUTOPAY charges a loan origination fee and a late fee. AUTOPAY provides new auto loans in all the 50 states and Washington, D.C.

6) Vroom

  • Vroom is an ecommerce platform that enables customers to buy, finance, sell, and trade cars online. The company was founded in 2013 and is headquartered in New York City.
  • Using Vroom, customers can get auto financing at low interest rates and fast approval times. Vroom has partnerships with “12+ banks and lending partners” like Chase, Capital One, Ally Financing, TD Bank, Santander Consumer USA, and SunTrust Banks, Inc.
  • Vroom has received financial backing from investors like L Catterton, General Catalyst, PICO Venture Partners, Allen & Company LLC, and T. Rowe Price Group, Inc. Vroom has received widespread appreciation from customers and media publications like Business Insider, Fortune, Fast Company, Bloomberg, Yahoo! Finance, and USA Today.
  • Vroom has emerged as a disruptor in the US auto loan market by providing customers attractive options like multiple car inspections, a free CARFAX history report of the car, free delivery, free limited warranty, and the ability to decide upon the final purchase after test-driving the car for seven days.
  • According to Vroom’s CEO Paul Hennessy, “At the highest level, we assemble great inventory for customers, give them a great shopping experience via mobile or desktop … and simplify the buying process so they can pull the trigger without haggling and paperwork. The car is delivered to your front door.” The above USP of Vroom has helped it emerge as a disruptor.
  • According to research, used cars represent the biggest consumer product category in the US. The market recorded a total sales of $841 billion in 2019, exceeding the $683 billion sales made by the grocery market and the $636 billion sales made by the new car market in 2019. The online used car market is also expected to grow from a “0.9% share of the total market currently, which is one of the lowest ecommerce penetration rate in a consumer category, to as much as 50% by 2030.” Research has also shown that consumer preference for shopping cars online prior to purchase has increased from 32% to 61% due to the COVID-19 pandemic. These statements show that Vroom has a tremendous opportunity to grow further and establish itself as a market leader.

7) Gravity Lending

  • Gravity Lending is a fintech that provides auto refinancing and car insurance products to customers in 24 states. The company was founded in 2015 and is headquartered in Austin, Texas.
  • Gravity Lending’s online platform gives customers customized loan offers at low interest rates and no hidden fees. The application and approval process is fast and secure and customers can get their loans approved from the comfort of their homes. The online platform helps customers save $114 per month on average.
  • Gravity Lending has been accredited with an A+ rating by the Better Business Bureau (BBB). The company has a rating of 4.9 out of 5 on Google and 5 out of 5 on Trustpilot.
  • Gravity Lending has emerged as a disruptor in the US auto loan market by providing attractive auto loan refinancing features like low credit score (starting from 580), auto loans from $10,000 to $100,000, fast processing and approval, no loan origination fee, no late fee, no prepayment penalty, long loan terms (from 25 to 84 months), interest rates between 1.99% APR and 16.99% APR, low minimum income (starting from $21,600), high mileage on vehicles (up to 120,000 miles), and acceptance of cosigner and co-borrower applications.
  • As part of its digital transformation initiative, Gravity Lending has partnered with the software provider Lightico to create an online solution that enables the auto loan refinance lender to “provide a completely streamlined digital originations process, fast time to funding, and an exceptional customer experience.” Integration of Lightico’s software with Gravity Lending’s online platform has helped the lender to achieve a 400% growth in 2020 despite the COVID-19 pandemic, a 90% package back rate, a 16% reduction in funding time, exceptional customer satisfaction, and an exceptional order booking.
  • Gravity Lending has also partnered with the marketing leader Stellar Auto Loans to “deliver an expanded suite of products and services to their credit union lending partners.” The partnership will enable credit unions to save thousands of dollars from the current auto loan accounts of customers.

8) iLendingDIRECT

  • iLendingDIRECT is a fintech that provides auto refinancing to customers in all 50 states and Washington, D.C. The company was founded in 2006 and is headquartered in Englewood, Colorado.
  • iLendingDIRECT’s online platform gives customers customized loan offers at low interest rates (starting from 1.99% APR) and no hidden fees. The application and approval process is fast and secure and customers can get their loans approved from the comfort of their homes. iLendingDIRECT is associated with several banks and credit unions and helps customers save $133 per month on average and $2,753 over the life of the loan.
  • iLendingDIRECT has been accredited with an A+ rating by the Better Business Bureau (BBB). It has also been placed among the top-3 auto finance fintechs in terms of customer satisfaction in Q3 2020 by LendingTree. Besides auto refinancing, iLendingDIRECT also helps customers with lease buyout facilities, company car purchasing finance, cash back loans, Guaranteed Asset Protection (GAP) car insurance, and vehicle service contract.
  • iLendingDIRECT has emerged as a disruptor in the US auto loan market by providing attractive auto loan refinancing features like low credit score (starting from 560), auto loans from $7,500 to $80,000, fast processing and approval, no loan origination fee, no prepayment penalty, long loan terms (from 12 to 84 months), interest rates between 1.99% APR and 17.99% APR, high mileage on vehicles (up to 150,000 miles), consideration of older vehicles (up to 10 years), and acceptance of co-borrower applications.
  • The online monthly savings calculator enables customers to find out the exact amount they can save by switching their existing auto loan to iLendingDIRECT.

Auto Loan Application Process of Various Lenders

The common auto loan application process across the vast spectrum of auto financers, i.e., banks, credit unions, captive lenders, and auto finance companies, involve steps like calculating the total loan, loan duration, APR, and monthly payment using the online calculators of the financer, conducting a presearch of the desired car and auto dealer, submitting an online loan application, and visiting the auto dealer with the approved loan application to negotiate the best deal for the car and conduct the final purchase. The loan application process also involves submission of personal details and documents, conducting background verification checks of the customer, and the associated follow up and communication over different mediums to have the loan application approved at the earliest. However, these are associated steps to the main steps listed above. Hence, these have not been mentioned. There are also exceptions to these general steps as some loan financers have their own separate procedures. Presented below are the auto loan application processes of top auto loan financers among banks, credit unions, captive lenders, and auto finance companies.

Banks

1) Chase Bank

  • Chase Bank’s auto loan application process involves three steps.
  • Step 1 involves customers conducting presearch by searching for a car of their choice, searching local auto dealerships, and viewing special partner programs.
  • Step 2 involves customers using Chase Bank’s online calculator to calculate their estimated APR and monthly payment based on their income and credit score. Once customers are aware of this information, they can search for the dealer in the Chase dealer network and submit an online application.
  • Step 3 involves contacting the dealer to complete the purchase after the loan is approved.
  • The loan offer, APRs, and credit decisions are valid for 30 days.
  • The features of Chase Bank’s auto loans are credit scores starting from 650, auto loans from $4,000 to $600,000, fast processing and approval, interest rates between 2.99% APR and 24.99% APR, long loan terms (up to 72 months), and acceptance of cosigner applications. However, Chase Bank charges a loan origination fee, a prepayment fee, and a late fee. Chase Bank’s auto loans can be availed by customers in all 50 states and Washington, D.C.

2) Capital One

  • Besides other products in its portfolio, Capital One provides auto refinancing and auto loans on new cars and used cars. The auto loan application process involves the following steps.
  • Step 1 involves pre-qualification for auto financing. Using Capital One’s Auto Navigator software, customers need to determine whether they pre-qualify for the loan using the online auto loan calculator. This pre-qualification does not impact the customer’s credit score. If the customer pre-qualifies, they can see the APRs, monthly payments, and offers for the vehicles they are considering.
  • Step 2 involves finding the car. The Auto Navigator software displays the inventory of all the participating dealers in Capital One’s network. Customers can choose their preferred car from the displayed inventory.
  • Step 3 involves personalizing the offer. Searching and selecting the car in Step 2 enables customers to get personalized offers with the estimates of the financing terms involved. Customers can then take these personalized offers to the dealers.
  • Step 4 involves purchasing the car. After the customer visits the dealer with the personalized Auto Navigator offer, they have to “fill out a credit application and provide any information needed for review to complete” the financing process. After the required inquiries are completed, the customer negotiates the purchase terms with the dealer and signs the final contract. The purchase of the car results in the dealer being mentioned as the original creditor in the final retail installment contract.
  • The features of Capital One’s auto loans are low credit scores starting from 550, auto loans from $4,000 to $40,000, fast processing and approval, no prepayment fee, interest rates starting from 3.99% APR, long loan terms (from 36 to 72 months), minimum monthly income of $1,500 or $1,800 depending on credit qualifications, and acceptance of cosigner applications. However, Capital One charges a loan origination fee and a late fee. Capital One’s Auto Navigator feature is not available to residents of Alaska and Hawaii (residents of the other 48 states and Washington, D.C. can avail the feature).

3) Wells Fargo

  • Besides other products in its portfolio, Wells Fargo enables new and used car financing through the dealer. The auto loan application process involves the following steps.
  • Step 1 involves customers getting themselves enrolled in the ‘Wells Fargo Online‘ portal by providing their social security number (SSN) and other personal details.
  • Step 2 involves customers using Wells Fargo’s online auto loan calculator to calculate their estimated APR, monthly payment, total amount financed, duration of the loan, and any possible hidden charges or penalties based on their income and credit score.
  • Step 3 involves customers conducting research of the car they want to buy and the auto dealer before final purchase.
  • Step 4 involves visiting the dealer within Wells Fargo’s dealer network (more than 12,000 dealers in the US) and signing the final loan agreement. Customers can avail their auto loan either through the dealership or through any Wells Fargo branch.
  • Customers have several options of making their monthly payments. They can pay online through the ‘Wells Fargo Online’ portal, by phone, by mail, by setting up automatic payments from their bank account, by visiting any Wells Fargo branch in person, or through MoneyGram or Western Union.
  • The features of Wells Fargo’s auto loans are credit scores starting from 650, auto loans from $5,000 to $300,000, fast processing and approval, no prepayment fee, interest rates between 3.12% APR and 19.51% APR, long loan terms (up to 72 months), and acceptance of cosigner applications. However, Wells Fargo charges a loan origination fee and a late fee. Wells Fargo’s auto loans can be availed by customers in 49 states (excluding Louisiana) and Washington, D.C.

4) PNC Bank

  • Besides other products in its portfolio, PNC Bank provides auto refinancing and auto loans on new cars and used cars. The auto loan application process involves the following steps.
  • Step 1 involves finding a car using PNC Total Auto, the online platform of PNC Bank. Customers can search for the car of their choice and the dealer and also see what other people in the same area paid for the car. PNC Bank gives new customers a loan waiver of $3,280 off MSRP on average.
  • Step 2 involves applying online and waiting for loan approval.
  • After the loan approval is received, step 3 involves “heading to the dealership with check ready financing.” Customers can purchase new cars from licensed dealers, used cars from individual sellers, or apply for a lease buyout loan. Customers can also refinance their existing auto loan from PNC Bank.
  • The features of PNC Bank’s auto loans are credit scores starting from 630, auto loans from $5,000 to $100,000, fast processing and approval, interest rates starting from 2.29% APR, long loan terms (up to 72 months), and acceptance of cosigner applications. However, PNC Bank charges a loan origination fee, a prepayment fee, and a late fee. PNC Bank’s auto loans can be availed by customers in 18 states (AL, CA, DE, FL, GA, IL, IN, KY, MD, MI, NJ, NY, NC, OH, SC, VA, WV, and WI) and Washington, D.C.

5) USAA FSB

  • Besides other products in its portfolio, USAA provides auto refinancing and auto loans on new cars and used cars. The new car loan rate starts from 2.89% APR on 2019 or newer models, while the used car loan rate starts from 3.29% APR on 2018 or older models. USAA provides a loan term up to 84 months on new car loans.
  • Customers can use USAA’s online auto loan calculator to calculate their estimated APR and monthly payment based on their income and credit score. Once they are aware of this information, the loan application process involves three easy steps. Customers can apply for the loans remotely and from their mobile phones as well.
  • Step 1 involves applying online after creating an account with USAA.
  • Step 2 involves e-signing the loan once it is approved.
  • Step 3 involves obtaining the loan check from USAA and taking it to the auto dealer to complete the purchase.
  • USAA does not charge any application fees, and the loan offer is valid for 45 days.
  • USAA provides attractive auto loan features like low credit score (starting from 560), auto loans from $5,000 to $3,000,000, fast processing and approval, no hidden closing cost, no prepayment penalty, long loan terms (from 12 to 84 months), and interest rates up to 16.28% APR. USAA also provides lease buyout options, payment deferment during natural disasters, and special loans for vehicles for the disabled. USAA’s auto loans can be availed by customers in all 50 states and Washington, D.C.

Credit Unions

1) Alliant Credit Union

  • Besides other products in its portfolio, Alliant Credit Union provides auto refinancing and auto loans on new cars and used cars. Alliant Credit Union’s auto loan interest rates start from the following: 2.74% APR for new vehicles, 2.99% APR for used vehicles, 2.99% APR for vehicle refinance, and 5.99% APR for used vehicles 10 to 15 years old.
  • Alliant Credit Union’s car loan application process involves five steps.
  • Step 1 involves customers using the online auto loan calculator to calculate their estimated APR and monthly payment based on their income and credit score. Once they are aware of this information, customers can get the loan process started by submitting an online loan application or by calling the number 800-328-1935.
  • Step 2 involves customers getting the loan application pre-approved by the credit union after due processing, usually on the same day of submitting the application.
  • Step 3 involves customers visiting the car dealer with the pre-approved loan and negotiating the best deal on the car. The ‘Alliant Car Buying Service‘ gives customers an additional interest rate discount of 0.5% APR. Members of the service save $3,750 off MSRP on average.
  • Step 4 involves customers submitting the purchase agreement with the car dealer and the other required documents to Alliant Credit Union. Once the credit union processes these documents, the loan documents are finalized online using Docusign.
  • Step 5 involves Alliant Credit Union sending the fund via FedEx to either the dealer or the customer.
  • The features of Alliant Credit Union’s auto loans are fast processing and approval, long loan terms (up to 84 months), no prepayment penalties, savings on vehicle maintenance and repairs through the ‘Alliant Vehicle Service Program,’ and a “debt protection benefit plan in the event of death, disability or involuntary unemployment.” The auto loans can be availed by customers in all 50 states and Washington, D.C.

2) American Airlines Federal Credit Union

  • Besides other products in its portfolio, American Airlines Federal Credit Union provides auto refinancing and auto loans on new and used cars, trucks, and SUVs. The credit union also provides loans for the purchase of airplanes, all-terrain vehicles (ATVs), boats, other watercraft, lawn mowers, garden tractors, motorcycles, motor homes (RVs), and other vehicles.
  • The credit union’s auto and vehicle loan interest rates start from the following: 1.80% APR for new vehicles, 1.80% APR for used vehicles, 4.74% APR for boats and airplanes, and 5.24% for RVs.
  • American Airlines Federal Credit Union’s auto loan application process involves four steps.
  • Step 1 involves getting “pre-approved for an auto loan” by applying online, through mobile phones, or by visiting the nearby branch of the credit union to discuss the auto loan options.
  • Step 2 involves researching the preferred car, the auto dealer, and “the value of any trade-ins” by visiting the online ‘Auto Buying Research Network.’
  • Step 3 involves looking into add-on options, discussing loan options, and getting a quotation from the credit union.
  • Step 4 involves the auto dealer sending the vehicle purchase order to the customer’s credit union loan officer.
  • The features of American Airlines Federal Credit Union’s auto and vehicle loans are fast processing and approval, low interest rates, low monthly payments, additional discounts, cash-out options, add-on options, Guaranteed Asset Protection (GAP) insurance, extended vehicle warranty, credit life insurance in the event of untimely death, and credit disability in the events of injuries or accidents.

3) Suncoast Credit Union

  • Besides other products in its portfolio, Suncoast Credit Union provides auto refinancing and auto loans on new and used cars. The credit union also provides loans for the purchase of boats, motorcycles, and motor homes (RVs).
  • Suncoast Credit Union has partnerships with Carvana, CU AutoBranch, and TrueCar. The auto loan application process involves the following steps.
  • Step 1 involves calculating the estimated total loan, APR, monthly payment, and any additional taxes using the online car loan calculator.
  • Customers can purchase cars from four sources: directly from Suncoast by looking at available offers, or online from either Carvana, CU AutoBranch, or TrueCar.
  • If customers want to purchase directly from Suncoast, step 2 involves creating an account with Suncoast Credit Union and applying for the vehicle loan to get it pre-approved. If customers want to purchase from Carvana, step 2 involves creating an account with Carvana and searching for the car of choice. If customers want to purchase from CU AutoBranch, step 2 involves searching for the car of choice in CU AutoBranch’s inventory. If customers want to purchase from TrueCar, step 2 involves finding the car in TrueCar’s inventory.
  • For all the above four purchase options, step 3 involves getting the financing and purchasing the desired car.
  • Step 4 involves visiting the dealer and picking up the purchased car.
  • Purchase from Carvana is associated with features like browsing certified preowned inventory offering a variety of reliable options, online purchase with next day delivery or pickup, and a “7-day money back guarantee and 100-day warranty.”
  • Purchase from CU AutoBranch is associated with features like a wide inventory of preowned cars below NADA pricing, in-person or online shopping with free delivery, and a “7 day/1,000 mile money back guarantee.”
  • Purchase from TrueCar is associated with features like guaranteed pricing, a saving of $3,383 off MSRP on average, browsing “online inventory of new or preowned vehicles,” and complete online purchase.
  • Suncoast Credit Union also provides auto refinancing at interest rates starting from 2.75% APR. Customers can apply for auto refinance using either SunNet Online Banking or the SunMobile app. The steps involve creating an account, logging in, applying for the loan, and proceeding with the application.

4) Golden 1 Credit Union

  • Besides other products in its portfolio, Golden 1 Credit Union provides auto refinancing and auto loans on new and used vehicles. The credit union’s auto loan interest rates start from the following: 2.99% APR for new vehicles and 3.24% APR for used vehicles. Auto refinancing gives customers a 1% rebate on the interest rate and up to $500 cash back.
  • The auto loan application process involves the following steps. Step 1 involves getting pre-approved for the loan before searching by applying online.
  • Step 2 involves searching for the car in the online inventory.
  • Step 3 involves visiting the dealer after getting pre-approval. Golden 1 Credit Union’s loan offers are valid for 30 days.
  • Step 4 involves negotiating with the dealer, obtaining the car loan at the dealership, and finally picking up the purchased vehicle.
  • The features of Golden 1 Credit Union’s auto loans are fast processing and approval, low interest rates, low monthly payments, flexible loan periods, no prepayment penalties, and additional discounts and offers when purchasing under the ‘Golden 1 Credit Union Discount Auto Buying‘ program.

5) Security Service Federal Credit Union

  • Besides other products in its portfolio, Security Service Federal Credit Union provides auto loans on new and preowned vehicles. The auto loan application process involves the following steps.
  • Step 1 involves calculating the estimated total loan, APR, monthly payment, and loan duration using the online auto loan calculators.
  • Step 2 involves searching for the desired car and the dealer in the credit union’s trusted dealer network.
  • Step 3 involves visiting the dealer, negotiating, signing the contract, and conducting the final shopping.
  • Customers can make their monthly payments through either the credit union’s ‘myBranch Online Banking,’ by phone, by mail, by visiting the credit union’s local branch in-person, or setting up recurring online payments.
  • The features of Security Service Federal Credit Union’s auto loans are fast processing and approval, flexible repayment terms, interest rates up to 18% APR, flexible loan periods up to 84 months, and full-coverage insurance.

Captive Lenders

1) Ford Credit

  • Obtaining a credit from Ford Credit involves the following steps. Step 1 involves identifying the vehicle of choice, base price of the vehicle, APR, monthly payment, loan duration, and other taxes using Ford Credit’s inventory and payment calculator.
  • Step 2 involves applying for credit online by providing personal information like Social Security Number (SSN), date of birth, employment status, annual income, address, monthly mortgage or rent, and email address.
  • Step 3 involves exploring financing options. Ford Credit provides four financing options: standard purchase, flex buy, red carpet lease, and ‘Ford Options.’
  • The standard purchase option enables customers to “finance a new, used, or certified preowned Ford,” build equity towards their next Ford purchase, enjoy the freedom to customize their vehicle and have no mileage limitations. The loan tenure is between 12 and 84 months.
  • The “flex buy is a Ford Credit-exclusive payment structure focused on providing lower payments for the first three years.” The first 36 payment months are provided with discounts of 15% or 18% and higher later payments enable the full balance to be fulfilled. Customers can build equity towards their next Ford purchase, enjoy the freedom to customize their vehicle, have no mileage limitations, have two payment discount choices, and have two term choices. The loan tenure is either 66 or 75 months.
  • The red carpet lease option “offers multiple terms and eight different mileage options.” Payments are usually lower than financing payments of similar term. Customers can also drive a new vehicle frequently, enjoy multiple mileage options, and complimentary Guaranteed Asset Protection (GAP) insurance.
  • The ‘Ford Options’ feature is exclusive to the Mustang Mach-E model. Under this feature, customers have to pay a final balloon payment after a 36-month or 48-month loan term, may choose to retain or return their existing vehicle or “renew into a new Ford or Lincoln.”
  • Step 4 involves locating a dealer, negotiating the terms of the contract, and signing the final contract.
  • The features of Ford Credit’s auto loans are credit scores starting from 650, auto loans starting from $7,500, fast processing and approval, interest rates starting from 0% APR, long loan terms (up to 72 months), no prepayment fee, and acceptance of cosigner applications. However, Ford Credit charges a loan origination fee and a late fee. Ford Credit’s auto loans can be availed by customers in all 50 states and Washington, D.C.

2) Nissan Motor Acceptance Corporation (NMAC)

  • The auto loan application process of Nissan Motor Acceptance Corporation involves the following steps. Step 1 involves searching Nissan’s online inventory to find the desired car, price, and associated offers.
  • Step 2 involves viewing the brochure of the selected car, locating a dealer, and comparing the price of the selected car with its competitors.
  • Step 3 involves using the online payment calculator to estimate the total loan, duration, APR, and monthly payment.
  • Step 4 involves submitting the online pre-approval credit application.
  • After the pre-approval application is approved, step 5 involves taking the pre-approval email to the dealer to negotiate and complete the purchase.
  • NMAC allows several monthly payment options like setting up recurring payments, scheduling a one time payment each month, payment through phone, mail, debit card, or MoneyGram.
  • The features of NMAC’s auto loans are credit scores starting from 650, auto loans from $10,000 to $150,000, fast processing and approval, interest rates starting from 1.9% APR, long loan terms (up to 75 months), no prepayment fee, and acceptance of cosigner applications. However, NMAC charges a loan origination fee and a late fee. NMAC’s auto loans can be availed by customers in all 50 states and Washington, D.C.

3) Honda Financial Services

  • The auto financing process of Honda Financial Services involves the following steps. Step 1 involves searching Honda’s online inventory to find the desired car, price, and associated offers.
  • Step 2 involves using the online payment estimator to estimate the total loan, duration, APR, and monthly payment.
  • Step 3 involves finding a dealer by searching Honda’s online database of dealers.
  • Step 4 involves applying online for credit pre-approval. After the pre-approval application is approved, step 5 involves visiting the dealer to negotiate and complete the purchase.
  • The features of Honda Financial Services’ auto loans are credit scores starting from 650, fast processing and approval, interest rates starting from 1.9% APR, long loan terms (up to 72 months), and acceptance of cosigner applications. However, Honda Financial Services charges a loan origination fee, a prepayment fee, and a late fee. Honda Financial Services’ auto loans can be availed by customers in all 50 states and Washington, D.C.

4) Chrysler Capital

  • Chrysler Capital provides buying and leasing options to customers. The auto financing process of Chrysler Capital involves the following steps.
  • Step 1 involves using the online finance calculator to estimate the total loan, duration, APR, and monthly payment.
  • Step 2 involves locating a dealer by searching Chrysler’s online database of dealers.
  • Step 3 involves finding the currently available offers and incentives on Chrysler vehicles.
  • Step 4 involves submitting the vehicle financing application online.
  • Once the financing application is approved, step 5 involves getting the financing offer and visiting the dealer to purchase the vehicle. Chrysler Capital gives financing for ownership, maintenance, vehicle customization, GAP coverage, and insurance.
  • The features of Chrysler Capital’s auto loans are credit scores starting from 640, auto loans from $1,000 to $200,000, fast processing and approval, interest rates from 0% APR to 30% APR, long loan terms (12 to 84 months), and acceptance of co-borrower applications. However, Chrysler Capital charges a loan origination fee, a prepayment fee, and a late fee. Chrysler Capital’s auto loans can be availed by customers in all 50 states and Washington, D.C.

5) Kia Motors Finance

  • Kia Motors Finance provides buying and leasing options to customers. The auto financing process of Kia Motors Finance involves the following steps.
  • Step 1 involves using Kia’s online budget calculator and payment calculator to estimate the total loan, duration, APR, and monthly payment.
  • Step 2 involves finding a dealer by searching Kia’s online database of dealers.
  • Step 3 involves finding the currently available offers on Kia vehicles.
  • Step 4 involves submitting the credit application online.
  • Once the application is approved, step 5 involves visiting the dealer and completing the purchase process.
  • The features of Kia Motors Finance’s auto loans are credit scores starting from 650, auto loans from $1,000 to $200,000, fast processing and approval, interest rates starting from 0% APR, and long loan terms (12 to 72 months). However, Kia Motors Finance charges a loan origination fee, a prepayment fee, and a late fee. Kia Motors Finance’s auto loans can be availed by customers in all 50 states and Washington, D.C.

Auto Finance Companies

1) RoadLoans by Santander Consumer USA

  • RoadLoans provides auto loans on new and used cars. The auto loan application process involves the following steps.
  • Step 1 involves using the online finance calculators like ‘car affordability calculator,’ ‘auto loan payoff calculator,’ ‘auto loan calculator,’ and ‘fuel savings calculator’ to estimate the total loan, duration, APR, savings, and monthly payment.
  • Step 2 involves locating a dealer by searching the online dealer database of RoadLoans.
  • Step 3 involves submitting an online application for auto loan. Customers receive an instant decision on their application from RoadLoans.
  • If the online application is approved, step 4 involves selecting from multiple loan offers displayed and downloading the loan voucher.
  • Step 5 involves visiting the dealership with the loan voucher and completing the purchasing process.
  • The features of auto loans by RoadLoans are credit scores starting from 550, auto loans from $5,000 to $75,000, fast processing and approval, no prepayment fee, interest rates starting from 1.99% APR, long loan terms (up to 72 months), and acceptance of cosigner applications. However, RoadLoans charges a loan origination fee and a late fee. RoadLoans’ auto loans can be availed by customers in 45 states (except AK, HI, MS, NH, and NV) and Washington, D.C.

2) Credit Acceptance Corporation

  • Credit Acceptance Corporation is an indirect finance company that connects customers to auto dealers and helps consumers purchase cars on credit. Credit Acceptance provides auto loans to customers with even bad credit or no credit. The auto loan application process involves the following steps.
  • In step 1, a customer desiring to buy a car completes the online application process by providing some personal information.
  • After the approval of the online application, Credit Acceptance connects the customer to three local dealers in step 2.
  • In step 3, the customer visits one of the dealers and completes the purchase of the car.
  • The features of auto loans by Credit Acceptance are very low credit scores from 300 to 700, auto loans from $5,000 to $50,000, fast processing and approval, high interest rates starting from 8% APR, medium-duration loan terms (up to 60 months), and acceptance of cosigner applications. However, Credit Acceptance charges a loan origination fee, a prepayment fee, and a late fee. The auto loans provided by Credit Acceptance can be availed by customers in all 50 states and Washington, D.C.

3) GM Financial (Formerly AmeriCredit Corporation)

  • GM Financial provides buying and leasing options to customers. The auto financing process of GM Financial involves the following steps.
  • Step 1 involves using the online affordability calculator and the payment calculator to estimate the total loan, duration, APR, savings, and monthly payment.
  • Step 2 involves searching GM’s expansive inventory to find the desired car, price, and associated offers.
  • Step 3 involves locating a dealer by searching the online dealer database of GM Financial.
  • Step 4 involves applying for an auto loan by submitting an online application.
  • If the online application is approved, step 5 involves visiting the dealer to complete the purchase. GM Financial also provides extended protection coverage for the purchased vehicle.
  • The features of auto loans by GM Financial are credit scores starting from 550, auto loans from $7,500 to $125,000, fast processing and approval, interest rates from 1.9% APR to 19.9% APR, long loan term (up to 72 months), and acceptance of cosigner applications. However, GM Financial charges a loan origination fee, a prepayment fee, and a late fee. The auto loans provided by GM Financial can be availed by customers in all 50 states and Washington, D.C.

4) Westlake Financial

  • Westlake Financial provides auto loans on new and used cars. The auto loan application process involves the following steps.
  • Step 1 involves using the online auto loan calculator to estimate the total loan, loan duration, APR, and monthly payment.
  • Step 2 searching Westlake’s I-Maxx inventory maximizer tool to search for all vehicles in the inventory.
  • Step 3 involves finding a dealership by searching the online dealer database of Westlake Financial.
  • Step 4 involves submitting an online pre-qualification application to qualify for an auto loan.
  • Step 5 involves visiting a dealer and purchasing the car after receiving the auto financing.
  • Westlake Financial provides auto financing under four full spectrum finance programs.
  • The ‘Titanium Program‘ is available for borrowers with 750+ credit score and provides interest rates starting from 2.99% APR, zero dealer fees, zero down payment, and loan term up to 72 months.
  • The ‘Platinum Program‘ is available for borrowers with credit score between 700 and 749 and provides interest rates starting from 5.99% APR, a maximum loan amount of $50,000, 2% dealer fees, minimal STIP requirements, no minimum income or job, and loan term up to 72 months.
  • The ‘Gold Program‘ is available for borrowers with credit score between 600 and 699 and provides a maximum loan amount of $50,000, 2% dealer fees, acceptance of hard-to-prove incomes, acceptance of prior repossessions, no minimum income or job, and loan term up to 72 months.
  • The ‘Standard Program‘ is available for borrowers with credit score between 0 and 599 and provides a maximum loan amount of $25,000, lender fees starting from $349, acceptance of hard-to-prove incomes, acceptance of open and past bankruptcies, no minimum income or job, and loan term up to 72 months.
  • The features of auto loans by Westlake Financial are no minimum credit scores, auto loans from $1,000 to $50,000, fast processing and approval, interest rates starting from 2.99% APR, long loan term (up to 72 months), no prepayment fee, and acceptance of cosigner applications. However, Westlake Financial charges a loan origination fee and a late fee. The auto loans provided by Westlake Financial can be availed by customers in 48 states (except NC and ND) and Washington, D.C.

5) LightStream (A Part of SunTrust Bank)

  • Besides other products in its portfolio, LightStream provides auto refinancing and auto loans on new, classic, and used vehicles. LightStream’s auto loans and auto refinancing are targeted at customers with good credit scores. The auto loan application process involves the following steps.
  • Step 1 involves using LightStream’s online rate chart to calculate the total loan, loan duration, APR, and monthly payment.
  • Step 2 involves submitting the loan application either through a smartphone, or a tablet, or a computer.
  • Once the loan application is approved, LightStream deposits the approved loan fund directly to the customer’s account in step 3. LightStream gives its customers the ability to choose the date when they want the fund in their account.
  • Step 4 involves visiting the dealer or private seller, negotiating the best deal on the car, and making the final purchase of the car.
  • The features of auto loans by LightStream are credit scores from 660 to 850, auto loans from $5,000 to $100,000, fast processing and approval, interest rates from 2.49% APR to 20.49% APR, long loan term (24 to 84 months), minimum annual income of $50,000, no loan origination fee, no prepayment fee, no late fee, and acceptance of cosigner applications. The auto loans provided by GM Financial can be availed by customers in all 50 states and Washington, D.C.
GLENN TREVOR
Glenn is the Lead Operations Research Analyst at Simple Manifestation with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

Self-Help Market

Previous article

Trends in Occupational Licensing

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.