After years of losing business to automaker’s captive finance companies, banks are reclaiming lost ground in the U.S. automotive finance sector, signaling a significant shift in lender dynamics as the market continues to stabilize after Covid and the microchip shortage. According to Experian’s State of the Automotive Finance Market Report: Q1 2025, banks increased their total auto loan market share to 26.55% during the first quarter, up from 24.79% in Q1 2024. This marks one of the most notable gains for banks in recent years and reflects renewed competitiveness in a sector long dominated by captive lenders and credit unions.
Captive finance companies—those affiliated directly with automakers—remain the largest players in the auto lending space, but their influence is waning. Their overall market share declined from 31.28% to 29.81% year-over-year. Credit unions also saw a modest uptick, growing from 20.20% to 20.63%. While these changes may seem incremental, they reflect deeper shifts in consumer financing behavior and lender strategy.
Experian’s Melinda Zabritski attributes the trend to several key market forces. “For the first time in years, we’re seeing banks expand market share and reassert their presence in a growing and competitive market,” she said. Zabritski noted that this movement runs counter to many trends, which had allowed captive lenders to dominate amid high interest rates and factory-driven incentive programs. With new inventory levels stabilizing and interest rates no longer climbing sharply, banks are re-entering the market more aggressively.
In the new vehicle financing segment, captives still command a majority share at 57.08%, but that's down nearly five percentage points from 62.07% a year ago. Banks, by contrast, increased their presence from 20.37% to 24.13%, while credit unions improved slightly to 10.89%, up from 9.62%. This shift is especially significant as it indicates that consumers may be moving away from manufacturer-subsidized deals toward more flexible or favorable terms offered by banks and credit unions.
Used vehicle financing presents a more competitive picture. Banks now lead this segment with 28.37% of the market, up from 27.88% in Q1 2024. Credit unions follow closely at 28.24%, showing steady growth from 27.71%. Captives, whose presence in the used market has always been limited, dropped further from 8.45% to 7.42%. The near-parity between banks and credit unions in used vehicle financing highlights the increasing importance of independent and regional lenders in this area. The numbers confirm what I’ve always said: Captives are there to help move new vehicles.
The report also provides encouraging signs regarding consumer credit health. The 30-day delinquency rate improved to 1.95%, down from 2.10% a year earlier, suggesting borrowers are managing monthly payments more effectively. Meanwhile, 60-day delinquencies held flat at 0.83%, showing stability in longer-term repayment history.
Loan characteristics also continued to evolve modestly. The average loan amount for new vehicles rose by $1,110 year-over-year, reaching $41,720 in Q1 2025. Despite higher loan balances, the average interest rate fell from 6.85% to 6.73%, likely reflecting competitive pressure among lenders and improved borrower credit profiles. As a result, average monthly payments rose slightly—from $737 to $745.
On the used side, the average loan amount ticked up to $26,144, an increase of just $90. Interest rates declined more noticeably, from 12.36% to 11.87%, and average monthly payments actually decreased slightly, from $524 to $521. This suggests that while prices and financing amounts have plateaued, affordability is gradually improving—at least on the used car front.
Zabritski emphasized that tax refund season and increased interest in refinancing also played a role in the quarter’s more favorable trends. With overall payment performance improving and lenders adjusting to a more stable inventory and rate environment, the automotive finance market appears to be entering a new phase—one defined by competition, strategic recalibration, and cautious optimism.
As 2025 progresses, all eyes will be on whether banks can sustain their momentum, whether captives will rebound with fresh incentive programs, and how credit unions will continue to leverage their community-driven appeal. The balance of power in automotive lending may be far from settled, especially if the tariffs are still hanging over the auto industry and automakers cut back on incentives, including low interest rates.