J. D. Power Ranks Third Party Lenders: Dealers Report

A new report by J.D. Power and Associates shows that some of America’s major banks are taking “lending market share” from the traditional captive finance companies that have historically provided factory direct financing to customers, often through a dealer. The new survey of dealers indicated that when these lending middlemen are looking for lenders to take on auto loans, some banks, including Bank of America, Ally Financial, Suntrust and Citizens Auto Finance, are offering attractive loan programs.

Part of what dealers like about these banks, according to J.D., Power, involves the ease of transactions, as well as rapid decision making and versatility for different kinds of specific auto loan arrangements. Generally, this shows that these banks are ready to deal in auto loans, at a time when some banks are choosing not get involved in this kind of lending, scared of the threat of large numbers of defaults.

Although it’s informative to think about who dealers tend to use as third party lenders, it’s even more important for consumers to think about how they can get the best auto loan offers on the market. Not all buyers know that they are able to go around the dealership and apply for a loan directly through one of these banks or finance companies. By doing this, customers can sometimes avoid high dealer markup of interest rates, or extra fees that the local seller may charge for taking control of a financing agreement. These issues illustrate how “price” has become an important factor in auto lending; with interest rates at historic lows, it becomes more important to look at what a seller or lender is adding to prime rates, and how fees that might be folded into monthly payment can boost an overall sale price.

The bottom line is that good research on comparative lending can really help out a household when it’s time to go to the lot to buy a new or pre-owned vehicle. Before you visit your dealer, look for a captive finance company for the make of vehicle you are wanting to buy, and check around with banks and credit unions to see who will loan you your vehicle money at the cheapest bargains. You’ll cut down your overall debt and save money by taking loan research into your own hands.