Automotive News Canada - July 2017 - v2 - 20
20
* JULY 2017
WHEN CAPTIVES RETREATED FROM
THE LOAN AND LEASE MARKET IN 2008,
BANKS WERE READY TO FILL THE VOID
AUTO FINANCE:
A CHANGED
LANDSCAPE
By HANNAH LUTZ
FINANCE CORRESPONDENT
80
The 2008 financial crisis
sharply reshaped Canadian auto finance. Automaker captive finance
companies that once dominated the auto loan and
lease market lost nearly
half their share within
four years. Captives have
since regained some
share, but their hold is
still significantly lower
than it was in 2008.
Market share numbers from J.D.
Power tell the story:
* In 2008, captives had 82 per cent
of the auto loan and lease market,
leaving 14 per cent to banks and
four per cent to finance companies
and credit unions.
* Just four years later, captives'
share shrunk to 45 per cent and
banks' rose to 50.
* Through the middle of June
2017, the captives have regained
some share, getting back to 54
per cent, but banks remained at a
strong 42 per cent - three times
their share pre-crisis.
Captives have gradually bounced
back from the financial crisis
because of leasing's comeback, but
experts agree that banks' auto lending prowess is here to stay. Rising
lease penetration and evolving
auto finance market solutions (see
New-vehicle loan share
by lender type
New-vehicle loan and lease
share by lender type
100
70
90
60
80
70
50
60
40
50
40
30
30
20
20
10
10
2008
Banks
2012
Captives
2017
2008
2012
Credit unions and finance companies
2017
SSource:
O U R JD
C EPower
: JD POWER
related story on Page 22) suggest
that there is room for banks and
captives alike. But the market is
unlikely to return to a 14/82 mix.
In 2008, many captives significantly decreased
their roles. Banks
were ready to
take on more
business, said
Grant Simons,
vice-president
and head of
Royal Bank
of Canada
Automotive
Finance.
"Banks were
happy to step into that void and find
ways of funding the end consumer
or the commercial enterprise," he
said. "There was a natural synergy
there, in that banks had capital, and
they largely knew how to do [auto]
lending."
Still, it was a change for the
industry, especially dealers.
Hugh Brennan, president of
Brennan's Dixie Chrysler in
Brampton, Ont., leased 65 to
70 per cent of the dealership's
vehicles 10 years ago, so he said
he had never worked with a bank
other than for a short stint. But his
relationship with the banks "morphed into a similarity I wasn't
expecting," he said.
LEASING LIFT
By law, banks are prohibited
from leasing, and a large percentage
of captives' 82 per cent share in 2008
would have been leasing, said Kevin
Teslyk, senior vice president of
automotive finance for Scotiabank.
"Leasing ultimately dried up
during the financial crisis. The captives were either not there or less
able to offer it to the same extent
that they had," he
said.
The subsequent
rebound of captive
financing reflects
an increase in leasing, Teslyk adds:
"We're at that part
of the cycle, and
we're expecting to
Bird: Bad
see more of that."
leasing made
There has never things worse.
been anything
wrong with leasing, but bad leases exacerbated the problem during
the recession, said Alan Bird of SCI
Marketview, a leasing and dealership technology company.
"Leasing has been a standalone
good product," he said. "What has
happened with leasing over the
last several decades is that people
or organizations really abused the
residual in order to try to help support moving product."
Brennan now only leases five per
cent of his sales, though he said he
might begin to increase his store's
lease penetration.
"I think we were leasing too
many cars back in the day, but it
became the easiest way to sell a
car," he said. But it was troublesome. Customers often returned
vehicles over their kilometre limit,
Banks were happy to step into that void and
find ways of funding the end consumer of the
commercial enterprise. There was a natural synergy
there, in that banks had capital, and they largely
knew how to do [auto] lending.
GRANT SIMON
Vice-president, Royal Bank of Canada Automotive Finance
Table of Contents for the Digital Edition of Automotive News Canada - July 2017 - v2
Automotive News Canada - July 2017 - v2 - Intro
Automotive News Canada - July 2017 - v2 - 1
Automotive News Canada - July 2017 - v2 - 2
Automotive News Canada - July 2017 - v2 - 3
Automotive News Canada - July 2017 - v2 - 4
Automotive News Canada - July 2017 - v2 - 5
Automotive News Canada - July 2017 - v2 - 6
Automotive News Canada - July 2017 - v2 - 7
Automotive News Canada - July 2017 - v2 - 8
Automotive News Canada - July 2017 - v2 - 9
Automotive News Canada - July 2017 - v2 - 10
Automotive News Canada - July 2017 - v2 - 11
Automotive News Canada - July 2017 - v2 - 12
Automotive News Canada - July 2017 - v2 - 13
Automotive News Canada - July 2017 - v2 - 14
Automotive News Canada - July 2017 - v2 - 15
Automotive News Canada - July 2017 - v2 - 16
Automotive News Canada - July 2017 - v2 - 17
Automotive News Canada - July 2017 - v2 - 18
Automotive News Canada - July 2017 - v2 - 19
Automotive News Canada - July 2017 - v2 - 20
Automotive News Canada - July 2017 - v2 - 21
Automotive News Canada - July 2017 - v2 - 22
Automotive News Canada - July 2017 - v2 - 23
Automotive News Canada - July 2017 - v2 - 24
Automotive News Canada - July 2017 - v2 - 25
Automotive News Canada - July 2017 - v2 - 26
Automotive News Canada - July 2017 - v2 - 27
Automotive News Canada - July 2017 - v2 - 28
https://www.nxtbook.com/nxtbooks/crain/canada_202404_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202403_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202402_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202401_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202312_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202311_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202310_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202309_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202308_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202307_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202306_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202305_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202304_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202303_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202302_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202301_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202212_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202211_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202210_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202209_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202208_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202207_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202206_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202205_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202204_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202203_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202202_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202201_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202112_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202111_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202110_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202109_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202108_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202107_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202106_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202105_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202104_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202103_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202102_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202101_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202012_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202011_ifm
https://www.nxtbook.com/nxtbooks/crain/canada_202011_acg
https://www.nxtbook.com/nxtbooks/crain/canada_202011_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202010_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202009_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202008_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202007_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202006_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202005_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202004_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202003_v2
https://www.nxtbook.com/nxtbooks/crain/canada_202001_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201912_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201911_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201910_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201909_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201907_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201906_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201904_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201903_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201902_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201901_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201812_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201811_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201810_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201809_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201808_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201807_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201806_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201805_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201804_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201803_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201802_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201801_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201712_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201710_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201709_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201708_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201707_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201706_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201705_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201704_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201701_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201612_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201611_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201610_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201609_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201608_v2
https://www.nxtbook.com/nxtbooks/crain/canada_201607_v2
https://www.nxtbookmedia.com