When NBA legend Larry Bird would enter the league's three-point shooting contest, he'd confidently ask: Who's playing for second place?
According to Experian, when it comes to new-vehicle auto originations right now, captive lenders are Bird and banks and credit unions are playing for second place.
Efforts to slow the COVID-19 outbreak and shield the economy are shifting the playing field for major automotive lenders, creating a lending environment that's a slam dunk for the auto industry's captive finance arms.
"When we look just at April ... whether it's total new or used, we actually have the captives really being the one to pick up market share and the bank share really steadily dropping," said Melinda Zabritski, Experian's senior director of automotive financial solutions.
For comparison sake, before the pandemic largely took hold, banks boosted their market share in the first quarter to 33.4 percent, up 1 percent from the year-earlier period. Credit unions lost ground, with 19.5 percent of all vehicle financing in the first quarter, compared with 19.9 percent in first quarter of 2019.
For a while, banks were Larry Legend when they gained more auto originations in the first quarter of 2019, taking business from captive lenders and credit unions, Zabritski said.
But credit unions have lost share quarter after quarter for the past year after a long period of growth. Credit unions have long benefited from a rising interest rate environment, but the dramatic drop in the Federal Reserve's benchmark rate — in an attempt to mitigate COVID-19's economic fallout — has leveled the playing field for other automotive lenders.
Credit union market share declined in 2019's first quarter for the first time since 2011.
Under COVID-19 conditions, banks and credit unions started playing for second place when captive lenders leveraged aggressive financing deals such as 0 percent interest, seven-year auto loans.
"You're going to see more heated competition between the credit unions and the banks," Zabritski said.
And the captive lenders, like Larry Bird, will be money.
"You can't really compete against a captive doing 0 percent," Zabritski said.
