According to a recent Nasdaq report, the auto loan industry reached a record high of $1.1 trillion in outstanding auto loans in the third quarter of 2017. Alongside this development, there has been a high number of auto loan delinquencies and charge-offs in 2017, causing some of the biggest banks in the country to scale back on auto lending.
This is supported by the combined steady growth rates of Ally Financial, JPMorgan Chase, Wells Fargo, Capital One, and Bank of America. These five players saw their combined market share drop from 26.2 percent to 25.3 percent in the past year.
In the past four years, the total number of auto loans increased by nearly 40 percent, which is unusually high. And while this can be partially attributed to consistent economic improvements, this high level of growth is also a result of auto lenders significantly lowering their lending standards.
In an effort to bring in more customers, auto lenders began offering higher loans amounts at lower rates. But the aforementioned increase in delinquencies is causing many lenders to begin pulling back, and these growth rates have started to slow down.
In spite of the market trend, Capital One saw its auto loan portfolio increased by over 15 percent in the past year. This is more than three times as much as the growth rate of its closest competitor. And with a $53.3 billion portfolio, Capital One threatens to overtake Wells Fargo as the third largest commercial banking lender in the auto lending industry.
At $67.1 billion, Ally still maintains its lead as the largest auto loan portfolio in the country. And with a 3.9 percent growth rate, Ally’s auto loan portfolio consistently stayed around industry levels. Bank of American also maintained a steady growth rate of 4.9 percent.
However, JPMorgan Chase saw its portfolio languish at just .9 percent growth, and Wells Fargo was forced to scale back its portfolio by over 11 percent. This steady decline by Wells Fargo may potentially be linked to mistrust from recent discoveries involving Wells Fargo auto loan insurance as well as opening up fake bank accounts.
At any rate, if Capital One continues to see increases in auto lending, then its charge-off rate could rise down the road according to Nasdaq.