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Consumer Automotive Financial Services in the USA

  • April 2014
  • -
  • Finaccord
  • -
  • 259 pages

Consumer Automotive Financial Services in the USA investigates the market for automotive financial services linked to sales of new and used passenger cars to individual buyers in the US. In addition to analysing the market for finance and leasing services, the study also covers vehicle service contracts (sometimes termed extended warranties), GAP protection, prepaid maintenance, tire and wheel protection (also known as road hazard protection), minor damage protection (also known as 'dent and ding' protection), road assistance, creditor insurance, excess wear and tear protection (for leased cars) and motor (auto) insurance.

As such, it provides a definitive overview of the market for consumer 'F&I' products in the US, breaking down results across four regions: the Midwest, the Northeast, the South and the West.

Using survey results for average take-up rates for finance and leasing propositions at the point of sale, data for the size and growth of the automotive finance and leasing market for consumers in the US is provided in terms of gross advances and assets leased for 2009 to 2013 with splits between finance for new and used cars and between finance organised through dealerships at the point of sale and directly with banks or other lending institutions.

Moreover, also by means of data for average take-up rates, the markets for vehicle service contracts, GAP protection, prepaid maintenance, tire and wheel protection, minor damage protection, road assistance, creditor insurance and excess wear and tear protection are sized in terms of gross written premiums and other revenues sold through the automotive trade (i.e. via dealers and manufacturers) in 2013. These markets, estimated to be worth over USD 28.5 billion in total in 2013, are broken down between new and used cars, and between new contracts sold during 2013 and in-force business sold in previous years but still being renewed in 2013.

The report draws on a survey of 250 leading car dealerships, of which almost one fifth are specialist used car dealers, as well as an analysis of the approach to consumer automotive financial services of 40 car manufacturer brands in the US. The PartnerBASE™ dataset that accompanies the report details each of the marketing initiatives for consumer automotive financial services traced by Finaccord for both dealers and manufacturers; a market data annexe is also available in a convenient spreadsheet format.

In addition to captive finance companies owned by manufacturer brands, organisations covered by the report include Allstate, Ally Financial, Arch Insurance Group, Bank of America, Capital One, Chase, CNA National Warranty, Cross Country Motor Club, JM Family Enterprises, Safe-Guard, Santander Consumer USA, The Warranty Group, Warrantech Automotive, Wells Fargo and Zurich. Together, the report and database will provide you with the definitive guide to current and future opportunities in consumer automotive financial services in the US.

Table Of Contents

Consumer Automotive Financial Services in the USA
Table of Contents

Executive Summary

Introduction

National Overview

Midwest Region

Northeast Region

Southern Region

Western Region

List of Graphics / Tables



0.0 EXECUTIVE SUMMARY

1.0 INTRODUCTION

What is this report about?

The focus of the report is on financial services related to the sale of passenger cars to individuals...

... commonly referred to in the US as 'FandI' products

Rationale

The provision of financial services is essential to support both car sales and profitability

This report offers a detailed analysis of the subject in the US based on primary research...

... including regional analyses across the Midwest, Northeast, South and West

Methodology

Survey of dealers and manufacturers

Market data

Computation of market data is based on a complex set of assumptions and variables…

…in order to provide market segmentations in unrivalled detail

External sources

Definitions

Finance and leasing products

Insurance, protection, warranty and assistance products

Operating models

Tied and non-tied providers

Abbreviations

PartnerBASE and market data annexe

Finaccord

2.0 NATIONAL OVERVIEW

Introduction

Passenger vehicle data

The US car parc shrank in the recession...

... although it ticked up again in 2012 and 2013

New car sales to individuals

New car sales have recovered strongly since the trough of 2009

Used car sales have grown more slowly than new car sales

GM was the leading manufacturer group in 2013, ahead of Ford and Toyota

Consumer automotive finance and leasing market

Market size and growth

Over 40 million cars were bought with finance or leasing in 2013...

...in a market that has risen at more than 10% a year by value since 2009

The new car finance and leasing market is not far behind that for used cars by value

The South makes up more than 40% of the US market by volume...

...while high income levels in the Northeast boost its share of the market by value

Point-of-sale finance for used cars in the South forms the largest single segment by volume...

...while the new car point-of-sale markets in the other three regions are almost equal by value

Types of finance and leasing product

While not frequently used anywhere, leasing is at its most popular in the Northeast and Midwest

Consumer automotive insurance, service contract and assistance markets

Market sizes

In total, the automotive trade is likely to have sold policies worth more than USD 28.5 billion in 2013...

...with vehicle service contracts for used cars the most important single component within this total

Nearly 45% of this national market value comes from the Southern region

New business for these policies is worth more than 4% of the value of new cars sold in the South

By policy type within the total market value, there are some small differences by region

Survey of automotive dealers and manufacturer brands - overview

Introduction

Provision of consumer automotive financial services

Overall dealer provision rates exceed 95% for one product, 80% for three and 70% for two...

... albeit specialist used car dealers are less likely to offer all FandI products researched

There may be an opportunity for more manufacturer brands to introduce minor damage protection schemes

Dealers in the Northeast are least likely to offer GAP protection due to selling practices in one major state

Number and nature of dealer schemes

Car dealers work with a very large number of finance and leasing providers...

...but with only one or two providers for most other products

Types of creditor insurance policy sold by dealers

Creditor insurance occasionally takes the form of cover for life and disability only

Types of motor insurance policy sold by dealers

All motor insurance policies sold through dealers cover liability and damage

Sources of road assistance distributed by dealers

Most cars sold by dealers carry road assistance through factory warranties or vehicle service contracts

Consumer uptake of automotive financial services through dealers

For the US as a whole, take-up rates for GAP protection rival those for vehicle service contracts...

... although they fall back for all other FandI products apart from finance and leasing

Take-up rates tend to be above average in the South but below average in the Northeast

Survey of automotive dealers and manufacturer brands - partnerships

Introduction

Finance and leasing

Four lenders collectively account for over 50% of the total non-tied market...

... although competition fragments rapidly thereafter

Some major used car specialists have their own captive finance provider

Six manufacturer brands utilise more than one official partner for finance and leasing

The top three providers are all captives...

...while the deal of Santander Consumer USA with Fiat Chrysler Automobiles transforms its potential

Chase and Ford Credit are the leading firms when combining dealer and manufacturer relationships

Vehicle service contracts

Almost half of all dealers offering vehicle service contracts use both tied and non-tied partners

Firms belonging to JM Family Enterprises hold the largest share of non-tied providers...

Aeverex, The Warranty Group and United Auto Care have key relationships with major chains

GM's partners are the leading external providers of vehicle service contracts through manufacturer brands...

...as 21 brands reportedly operate their own contracts

The overall market for vehicle service contracts is characterised by a high degree of fragmentation

GAP protection

Only a quarter of dealers offering GAP protection rely on tied providers only

By a narrow margin, Allstate and JMandA Group are the leading non-tied providers

A majority of manufacturer brands have introduced schemes for GAP protection...

...with Warrantech Automotive well-placed thanks to its partnership with Fiat Chrysler Automobiles

JM Family Enterprises is the number one group for GAP protection on a combined analysis

Prepaid maintenance

Over 70% of dealers offer prepaid maintenance plans with most sticking to tied providers

Three non-captive partners work directly with manufacturer brands

Tire and wheel protection

Most dealers selling tire and wheel protection use tied partners...

...and Safe-Guard is the leading partner for manufacturer brands

Minor damage protection

Nearly 40 non-tied providers work with dealers for 'dent and ding' protection across the US...

...with Safe-Guard the leading external partner for manufacturer brands once more

Road assistance

AAA is the assistance provider for used cars sold by Enterprise Rent-A-Car

Cross Country Motor Club is the preferred assistance provider of a majority of manufacturer brands...

... in spite of competition from non-captive entities such as Road America and Signature Motor Club

Creditor insurance

Central States Health and Life Co. of Omaha holds the most partnerships with dealers

Only one manufacturer group runs a creditor insurance scheme and even this is not available in every state

Excess wear and tear protection

Over 60% of dealers offer excess wear and tear protection...

...while three manufacturer groups work with external partners

Motor insurance

Very few dealers in the US intermediate motor insurance...

...though 40% of manufacturer brands offer it, selling online or by phone

3.0 MIDWEST REGION

Introduction

Passenger vehicle data

New car sales have recovered strongly since the low point recorded in 2009

Consumer automotive finance and leasing market

Market size and growth

Point-of-sale finance for new cars has recovered most rapidly since 2009...

... causing the total market value to rise at a compound annual growth rate more than 10% since then

Types of finance and leasing product

Leasing makes up nearly a fifth of point-of-sale finance contracts in the Midwest

Consumer automotive insurance, service contract and assistance markets

Market sizes

In total, the automotive trade is likely to have sold policies worth more than USD 5 billion in 2013...

...with more than 50% of these revenues coming from used car sales

Survey of automotive dealers and manufacturer brands - overview

Introduction

Provision of consumer automotive financial services

Four products are offered by more than 80% of dealers...

...though among specialist used car dealers, finance is the only product offered by more than 80%

Manufacturers lag behind dealers for the provision of minor damage protection

Number and nature of dealer schemes

On average, car dealers in the Midwest use more than 13 providers for finance and leasing...

...and an average of 1.74 for vehicle service contracts

Types of creditor insurance policy sold by dealers

Creditor insurance sometimes takes the form of cover for life and disability only

Sources of road assistance distributed by dealers

Vehicle service contracts nearly always include road assistance

Consumer uptake of automotive financial services through dealers

Nearly three quarters of new car customers take out point-of-sale finance or leasing...

...and more than a fifth of these acquire tire and wheel or minor damage protection

Survey of automotive dealers - partnerships

Introduction

Finance and leasing

Chase, Capital One and U.S. Bank hold around a third of dealer partnerships between them...

...while CarMax Auto Finance is likely to distribute about 10% of all used car point-of-sale finance

Other used car finance partners range from collector car specialists to sub-prime lenders

Ford Credit is likely to be the leading firm when combining dealer and manufacturer relationships

Vehicle service contracts

Nearly half of dealers that offer vehicle service contracts work with both tied and non-tied competitors...

...led by JM Family Enterprises and The Warranty Group

In a competitive environment, the leading vehicle service contract provider controls only 10% of this market

GAP protection

Over 20 non-tied competitors are named by dealers for GAP protection...

...led by JM Family Enterprises, Zurich and American Auto Guardian...

... and a combined analysis of GAP protection providers ranks the former as the number one group

Prepaid maintenance

A majority of dealers offer prepaid maintenance plans run by their manufacturer brand

Tire and wheel protection

More than three quarters of dealers in the Midwest offer tire and wheel protection

Minor damage protection

A dozen non-tied providers work with dealers for 'dent and ding' protection

Road assistance

Non-tied road assistance providers are generally linked with vehicle service contracts

Creditor insurance

Where offered, dealers source creditor insurance separately from finance providers

Excess wear and tear protection

Six non-tied partners are used for excess wear and tear protection by dealers in the Midwest

Motor insurance

A very small percentage of dealers sell motor insurance themselves

4.0 NORTHEAST REGION

Introduction

Passenger vehicle data

Used car sales peaked in 2011 before then falling back in 2012 and 2013

Consumer automotive finance and leasing market

Market size and growth

New car point-of-sale and direct lending have both grown substantially faster than lending for used cars...

... causing the total market value to rise at a compound annual growth rate above 7% since 2009

Types of finance and leasing product

Leasing makes up almost a fifth of all point-of-sale finance contracts in the Northeast

Consumer automotive insurance, service contract and assistance markets

Market sizes

In total, the automotive trade is likely to have sold policies worth nearly USD 5 billion in 2013...

...with a majority of these revenues coming from vehicle service contracts

Survey of automotive dealers and manufacturer brands - overview

Introduction

Provision of consumer automotive financial services

Both finance / leasing and vehicle service contracts are offered by more than 90% of dealers...

...though among specialist used car dealers, finance is the only product offered by more than 80%

Manufacturers' weighted provision rates exceed those of dealers except for minor damage protection

Number and nature of dealer schemes

On average, car dealers in the Northeast use more than ten providers for finance and leasing...

... with an average of 1.82 employed for vehicle service contracts

Sources of road assistance distributed by dealers

Vehicle service contracts nearly always include road assistance

Consumer uptake of automotive financial services through dealers

Used car customers take out vehicle service contracts significantly more often than new car buyers...

...and a fair percentage of these customers acquire tire and wheel or minor damage protection

Survey of automotive dealers - partnerships

Introduction

Finance and leasing

Chase, Wells Fargo and Bank of America hold half of dealer partnerships between them...

...while other providers include local banks, credit unions and sub-prime lenders

Chase and Ally Financial are the leading firms when combining dealer and manufacturer relationships

Vehicle service contracts

Only a quarter of dealers rely exclusively on their manufacturer brands' schemes...

...and non-tied partnerships are led by Zurich, CNA National Warranty and JM Family Enterprises

Overall, the Northeast market is as highly fragmented as its equivalents in other US regions

GAP protection

Fewer dealers in the Northeast offer GAP protection because of regulations in New York State

CNA National Warranty and Ethos Group are the leading non-tied providers

No single provider accounts for more than 10% of the overall market for GAP protection in the Northeast

Prepaid maintenance

JM Family Enterprises accounts for more than a third of non-tied partnerships with dealers

Tire and wheel protection

More than 20 provider brands offer tire and wheel protection to dealers

Minor damage protection

Dent Wizard is one of the leading non-tied providers in the Northeast for 'dent and ding' protection

Road assistance

Stand-alone road assistance policies are offered by a few dealers in the Northeast

Excess wear and tear protection

Eight non-tied partners are used for excess wear and tear protection by dealers

Motor insurance

As elsewhere in the US, dealers in the Northeast display little enthusiasm for selling motor insurance

5.0 SOUTHERN REGION

Introduction

Passenger vehicle data

In keeping with the rest of the US, sales of both new and used cars have grown strongly in recent times

Consumer automotive finance and leasing market

Market size and growth

More than 13 million used cars were bought with finance or leasing in the Southern region in 2013...

...and by value, all segments of the market grew by more than 10% a year between 2009 and 2013

Types of finance and leasing product

One finance product type accounts for almost 90% of all point-of-sale contracts in the South

Consumer automotive insurance, service contract and assistance markets

Market sizes

Service contracts, protection, insurance and assistance policies are worth more than USD 12 billion...

...with the used car market greater than the new car market for four of these products

Survey of automotive dealers and manufacturer brands - overview

Introduction

Provision of consumer automotive financial services

Creditor and motor insurance score the lowest provision rates among dealers in the South

Specialist used car dealers do not offer leases

Dealers are somewhat more likely to offer minor damage protection than manufacturers

Number and nature of dealer schemes

On average, car dealers in the Southern region use more than 13 providers for finance and leasing...

...but fewer than two providers for all other products apart from road assistance

Types of creditor insurance policy sold by dealers

Where offered, most dealers sell comprehensive creditor insurance policies

Sources of road assistance distributed by dealers

Road assistance is usually provided automatically or packaged with other products

Consumer uptake of automotive financial services through dealers

Attachment rates for GAP protection are very similar to those for vehicle service contracts

...and more than 15% of eligible customers in the Southern region take out creditor insurance

Survey of automotive dealers - partnerships

Introduction

Finance and leasing

Wells Fargo, Chase and Capital One hold the most partnerships with dealers...

... while leading used car dealers have their own finance arms such as DriveTime Sales and Finance...

...and J.D. Byrider's Car Now Acceptance Corporation

Ford Credit, Chase and Toyota Financial Services hold the largest combined share of partnerships

Vehicle service contracts

The vast majority of dealerships have an arrangement for offering vehicle service contracts....

...using Florida-based Fidelity Warranty Services and JMandA Group most often among non-tied providers...

... followed by American Financial and Automotive Services, Allstate and CNA National Warranty

Two competitors would feature more prominently if their subsidiaries are viewed in combined terms

While Ford is the leading individual partner, JM Family Enterprises leads as a combined group

GAP protection

The leading five non-tied competitors control less than half of dealers' non-tied partnerships...

...with the rest shared between over 20 other providers

Allstate is ranked second to JMandA Group when combining dealer and manufacturer partnerships

Prepaid maintenance

Dealers in the Southern region use at least a dozen non-tied providers of prepaid maintenance

Tire and wheel protection

More than 20 non-tied companies are identifiable for tire and wheel protection

Minor damage protection

Over three quarters of dealers offering 'dent and ding' protection use a non-tied partner for this...

...including specialists such as Dent Wizard, Ding Monkey, IAS and Xzilon

Road assistance

Thrifty Car Rental extends its own road assistance service to people buying used cars from it

Creditor insurance

Central States Health and Life Co. of Omaha is the leading underwriter for creditor insurance in the South

Excess wear and tear protection

JM Family Enterprises and CNA National Warranty are the main non-tied partners used by dealers

Motor insurance

Dealers in the US (including the Southern region) rarely offer motor insurance

6.0 WESTERN REGION

Introduction

Passenger vehicle data

Sales of new cars easily outpaced sales of used cars between 2009 and 2013

Consumer automotive finance and leasing market

Market size and growth

Close to 8 million cars were bought with finance or leasing in the Western region in 2013...

...in a market worth nearly USD 100 billion in new business in that year

Types of finance and leasing product

The vast majority of finance contracts are for simple loans with no option to return the car at the end

Consumer automotive insurance, service contract and assistance markets

Market sizes

Vehicle service contracts make up more than half the total value of policies sold by the automotive trade...

...and more than half of the vehicle service contract market is attributable to used car sales

Survey of automotive dealers and manufacturer brands - overview

Introduction

Provision of consumer automotive financial services

Finance and leasing, GAP protection and vehicle service contracts are available most often from dealers

Specialist used car dealers do not offer leases

Manufacturer brands intermediate motor insurance far more often than dealers

Number and nature of dealer schemes

On average, car dealers in the Western region use more than 16 providers for finance and leasing...

...and employ more than two providers for vehicle service contracts

Types of creditor insurance policy sold by dealers

Where offered, creditor insurance covers temporary as well as permanent incapacity

Sources of road assistance distributed by dealers

Road assistance is usually provided automatically or packaged with other products

Consumer uptake of automotive financial services through dealers

Used car customers take out vehicle service contracts more often than new car customers...

...although a substantial proportion of new car customers acquire prepaid maintenance

Survey of automotive dealers - partnerships

Introduction

Finance and leasing

Wells Fargo is the competitor most often named by dealers among their main non-tied lenders...

...with a range of different providers mentioned for sub-prime lending

Wells Fargo and Chase are the leading firms when combining dealer and manufacturer relationships

Vehicle service contracts

Less than a fifth of dealers rely solely on manufacturer brands' own schemes...

...with Zurich and Wells Fargo's Warranty Solutions subsidiary the main non-tied providers...

... in a market characterised by a high degree of fragmentation, as elsewhere in the US

Certain manufacturer brands are likely to hold the highest market shares in a competitive market

GAP protection

16 non-tied competitors are named by dealers for GAP protection...

...led by Allstate, Safe-Guard and JM Family Enterprises

When combining dealer and manufacturer partnerships, Allstate emerges as the likely market leader

Prepaid maintenance

Virtually all dealers offering prepaid maintenance use their manufacturer brand in this context

Tire and wheel protection

Five providers of tire and wheel protection are named by more than one dealer in the Western region

Minor damage protection

DentPro and Xzilon are reasonably prominent specialists for 'dent and ding' protection

Road assistance

Specialist used car dealers rarely have an arrangement for offering road assistance

Creditor insurance

Only two underwriters are named by dealers in the Western region for creditor insurance

Excess wear and tear protection

Five non-tied partners are utilised by dealers for excess wear and tear protection

Motor insurance

Dealers in the US (including the Western region) rarely distribute motor insurance

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