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  • Nicholas Hinrichsen

Top 40 auto loan companies to refinance in 2020 pre and post COVID-19

Updated: Aug 19

Following the COVID-19 pandemic, we performed a study to find out what car brands and models are likely to be good autos for refinancing. Americans need cash and refinancing your auto loan is a creative and untapped option. Refinancing mortgages is very common and we predict that we will see a wave of car owners refinance their cars, too.


To be most helpful, we performed a follow-on study in which we tried to identify the 40 auto loan companies that are great candidates for refinancing both in general and during these trying times in particular. We hypothesized that a number of lesser known auto loan companies will offer the most promising refinancing opportunities for three seasons:


  1. The most well-known banks are not specialized on auto lending. They are not willing to take a big risk and therefore focus on prime credit customers. Car owners with lower credit scores, however, are the segment who can expect the biggest savings from refinancing.

  2. Specialized auto lenders are probably closely linked to car dealers. 79% of all car shoppers get their loan at the dealership. To reduce the risk of a loan to people with challenged credit, lenders require a close relationship to the dealer who sells the cars: if the dealer sells a bad car, the car owner will stop making payments.

  3. Title loans are likely a big opportunity. Lastly, we would expect that a number of people in urgent need for cash have approached title loan companies. Title loan companies offer car owners a quick and easy way to get cash, however, at horrible if not predatory rates.


Table of contents

  1. What are the most common auto loan companies in the U.S.?

  2. What are the market shares of the different auto loan company types?

  3. We observed four groups of auto loan companies differing in average rates

  4. We observed that some auto loan companies are full spectrum lenders

  5. How to refinance my Title Loan?

  6. How can I refinance my high interest auto loan?

  7. How to refinance your auto loan and save thousands of dollars

What are the most common auto loan companies in the U.S.?


There are multiple thousands of auto loan companies in the U.S. - it's a very fragmented market. However, we found that the 20 companies with the biggest auto loan market share combined lend 50% of all auto loans:

If you take a look at the table above, you'll see four different types of lenders:


  1. Banks: Banks have traditionally been in the business of lending money. Over time however, banks discovered more lucrative businesses and shifted their focus away from using their customers' deposits for loans. Finally, lending has become a lot more regulated as a consequence of the 2008 mortgage crisis. Today, traditional banks find the lending business less appealing.

  2. Captive finance: Most car makers have their own auto loan companies. Through their own auto loan companies, car makers can help their dealers sell cars quicker. Captive finance companies subsidize leases, run financing promotions such as 0% financing on new cars or defer payments for the first couple of months.

  3. Speciality financing: Santander, Credit Acceptance and GMF Americredit are unlike the previously mentioned banks. These lenders are focused on the segment of the American population with challenged credit. We suspect the speciality financing companies to be the auto loan companies that offer the biggest refinancing opportunity.

  4. Buy Here Pay Here: Carmax is the biggest car dealer in the U.S. and sells around 700,000 cars every year. We described that dealers make most of their money with financing and protection plans. Some dealers go even further and get into the business of lending money to their own customers to further improve their margins. If a dealer sells a car and provides financing, we call these dealers Buy Here Pay Here dealers.



What are the market shares of the different auto loan company types?


On a quarterly basis, Experian releases their "State of the Auto Finance Market" study. In their report, Experian distinguishes between five different auto loan companies:


  1. Banks (32% market share in 2019)

  2. Captive finance companies (30% market share in 2019)

  3. Speciality financing (12% market share in 2019)

  4. Buy Here Pay Here (6% market share in 2019)

  5. Credit Unions (20% market share in 2019)


The market shares above are measured in dollar ($) volume of outstanding loans. The numbers are therefore skewed towards the loan sources that finance the more expensive, often new cars (e.g. Captive finance companies and Banks)


Specialty financing and Buy Here Pay Here would have a much larger share than the numbers above suggest when measuring market share as number of Americans in each of the segments. Specialty financing and Buy Here Pay Here are also the segments where we suspect the highest auto loan rates and therefore the highest likelihood and success rate for refinancing.



What are the auto loan companies with the highest rates in the U.S.?


In the following, we gathered a subset of nation-wide used car transactions from car owners who were still paying on their car loans. Subsequently, we grouped the list by auto loan company and estimated the average auto loan rate for each of the lenders. Next, we sorted the list by average auto loan rates - starting with the highest average rate. Finally, we excluded all the auto loan companies for which we observed an average rate of below 8%.

The above chart blew our mind! In pink, you find the average auto loan rate of the respective auto loan company. In purple, we indicated the standard deviation. The standard deviation is a fancy word for the average difference from the observed average rate.



We observed four groups of auto loan companies differing in average rates


  1. Title loan companies: average rates between 30% (the highest legally permitted rate) and 25%

  2. Specialty financing companies: average rates between 25% and 15%

  3. Captive financing and other lenders: average rates between 15% and 10%

  4. Other: average rates below 10%, which is why we excluded all auto loan companies with average rates below 8%


We observed that some auto loan companies are full spectrum lenders


Let me explain the chart with the help of an example. Look for Volkswagen Credit, the 12th auto loan company from the right. The average Volkswagen Credit rate is ~12%. However, in our sample we found that Volkswagen Credit rates span a very wide range:


Volkswagen Credit is one of the 'Captive financing companies' described above. On the one hand, captive financing companies offer rates as low as 0% to promote new vehicle sales. On the other hand, we found that Volkswagen vehicles are near the top of the list of vehicles most likely to meet the criteria for refinancing. Therefore, a number of the Volkswagen Credit loans in our study had very high rates.


We observed rates ranging from as low as 0% to as high as 29%. Auto loan companies that offer credit to such a wide range of credit profiles are also called full spectrum lenders. In the following, we'll spend some time analyzing a number of the above lenders in more detail:



How to refinance my Title Loan?


The highest interest rate lenders are allowed to charge by law is 30%. Not surprisingly, two out of the three lenders with the highest average loan rate - north of 25% - are Loan Mart and Title Max. Both of these two companies are title loan companies.


In some U.S. states, payday lending was made illegal. As a consequence, a number of payday lenders transformed into title loan companies. In other words, title loan companies are charging predatory rates and you should try to get out of these loans as soon as possible or even better avoid them in the first place.


A title loan is in fact quite similar to refinancing: you hand over (a lien on) your vehicle title against cash. You have to first repay your debt before you're able to sell the vehicle. The biggest difference of title loans vs. refinancing is the age of the vehicle and the speed to get cash:


  1. While you can get a title loan on a relatively old vehicle, refinancing assumes you're planning to use your vehicle for the foreseeable future. Therefore, if you plan to use your vehicle for the foreseeable future, think twice before you take out a title loan and consider refinancing first.

  2. The key value proposition of Title Loan companies is 'quick cash'. Therefore, getting a check by handing over your vehicle title to a Title Loan company is a process that takes minutes and only in the worst cases hours. In contrast, refinancing an auto loan so far been a cumbersome process.



How can I refinance my high interest auto loan?


In the segment of auto loan companies with an average interest rate between 15% and 25%, a total of 8 companies make up 90% of the loans. Before looking into these auto loan companies in more detail though, we want to first provide more context around people with challenged credit. We typically distinguish between:

  • behaviorally challenged credit

  • situationally challenged credit

  • no / thin credit


People with behaviorally challenged credit are Americans who never received proper education around credit and therefore lack financial literacy. As a result, people with behaviorally challenged credit struggle to improve their credit over time: their behaviors make them risky borrowers, e.g. skipping or defaulting on payments without understanding or caring about the consequences.


Americans with situationally challenged credit, in contrast, ended up with lower credit scores through unfortunate circumstances, e.g. job loss, medical bills, divorce etc. The situationally challenged credit segment usually has a good understanding of how credit works, they just need to get a second chance.


Americans with no / thin credit are either young adolescents who have never owned a credit card or immigrants. Both of these segments are heavily disadvantaged: no lender will extend credit to these groups because of a lack of prior credit history. For a lack of credit history, lenders assume the worst.



OneMain Financial


OneMain Financial's primary business is to provide loans and insurance products to the segment of Americans who have limited access to traditional banks and credit card companies. These include Americans with no / thin credit as well as situationally challenged credit.


With 1,500 branches across 44 states, OneMain Financial is the largest financial services company focused on lending. Their borrowers start out with limited access to credit and therefore higher rates. Once a OneMain Financial customer makes her payments reliably, however, she quickly qualifies for better rates.


We therefore observed a wide spread around the average rate of ~23% on the OneMain Financial auto loans:

  • The lower half's average rate is ~17%.

  • The upper half's average rate is ~29%.

Once you made 6 payments or more you should refinance your OneMain Financial auto loan.



Credit Acceptance Corporation


In one of our studies we stated that dealers sell cars in order to create an opportunity to sell the much higher margin products, such as financing. Believe it or not, Credit Acceptance Corporation was started in 1972 by one of the biggest used car dealers in the world, Donald Foss. Clearly, the dealer noticed that financing is the higher margin product and therefore focused his efforts on lending exclusively.


We observed a wide spread around the average rate of ~22% on the Credit Acceptance Corporation auto loans:

  • The lower half's average rate is ~16%.

  • The upper half's average rate is ~29%.

Once you made 6 payments or more you should refinance your Credit Acceptance Corporation auto loan.



American Credit Acceptance


A number of the auto loan companies focused on Americans with challenged credit have been around the block for quite some time. American Credit Acceptance, in contrast, was founded by George D. Johnson in 2007, only.


Interestingly, George used to be in politics and served in the South Carolina House of Representatives from 1969 to 1974. He acquired the in-house finance company of Sonic Automotive, put together an experienced executive team and relocated the business to South Carolina.

American Credit Acceptance is focused on helping consumers in the challenged credit segment. We observed a wide spread around the average rate of ~22% on their auto loans:

  • The lower half's average rate is ~18%.

  • The upper half's average rate is ~27%.

Once you made 6 payments or more you should refinance your American Credit Acceptance auto loan.

Exeter Financial


Exeter Financial is a Connecticut based auto loan company specialized on Americans with challenged credit. We observed a wide spread around the average rate of ~20% on the Exeter Financial auto loans:

  • The lower half's average rate is ~15%.

  • The upper half's average rate is ~25%.

Once you made 6 payments or more you should refinance your Exeter Financial auto loan.


Westlake Financial


The entrepreneur Don Robert Hankey was born in 1943 as the son of a Los Angeles based car dealer. Just like the founder of Credit Acceptance Corporation, Don found that auto loans are a more lucrative and scalable business than selling cars. Therefore, he started Westlake Financial, a sub-prime auto lender.


We observed a wide spread around the average rate of ~19% on the Westlake Financial auto loans:

  • The lower half's average rate is ~14%.

  • The upper half's average rate is ~24%.

Once you made 6 payments or more you should refinance your Westlake Financial auto loan.

Prestige Financial


Larry H. Miller was an entrepreneur from Utah who is best known for being the owner of the NBA. Like some of his peers, Larry owned numerous car dealerships before he got into the auto lending business. Before he passed away, Larry owned Prestige Financial, which is yet another auto loan company focused on Americans with challenged credit.


For Prestige Financial we also observed a wide spread around the average rate of ~18%:

  • The lower half's average rate is ~14%.

  • The upper half's average rate is ~21%.

Once you made 6 payments or more you should refinance your Prestige Financial auto loan.



Santander


Thomas Dundon is majority shareholder and CEO of the Carolina Hurricanes of the NHL. He co-founded a subprime auto loan company called Drive Financial Services, LP, which eventually became Santander Consumer USA, held by one of the biggest Spanish banks. www.roadloans.com is Santander's online auto loan brand.


Since Santander is focused on the subprime market, we were not surprised to observed a wide spread around the average rate of ~17% on the Santander's auto loans:

  • The lower half's average rate is ~12%.

  • The upper half's average rate is ~23%.

Once you made 6 payments or more you should refinance your Santander auto loan.

Regional Acceptance Corporation


Based on Greenville, North Carolina Regional Acceptance Corporation is a subsidiary of BB&T Corporation and focused on funding car shoppers with challenged credit.


The average rate of ~15% on the Regional Credit Acceptance auto loans:

  • The lower half's average rate is ~10%.

  • The upper half's average rate is ~20%.

Once you made 6 payments or more you should refinance your Regional Credit Acceptance auto loan.



Flagship Credit Acceptance


Michael Ritter is the Chairman of Flagship Credit Acceptance's board. Before he became the chairman, Michael was the CEO and worked for the company three different times and under three different owners.


  • The original Flagship was launched in 1988. Ritter left the company in 2000, when Flagship was sold to Wells Fargo.

  • Wells Fargo removed the Flagship name and sold the company to a private equity firm in 2006. Ritter rejoined the company then and relaunched the Flagship name.

  • In an interesting turn of events, the private equity company Perella Weinberg bought Flagship and appointed Michael as the CEO.


Flagship succeeded in the non-prime auto loan segment while bigger banks had other priorities. Flagship's average auto loan rate is around ~14% while we observe a relatively wide spread:

  • The lower half's average rate is ~10%.

  • The upper half's average rate is ~18%.

Once you made 6 payments or more you should refinance your Flagship Credit Acceptance auto loan.



As a rule of thumb, if your lender has the terms "Credit Acceptance" in its name, you should get excited about the possibly to refinance your loan. The same is true if you got a car loan with any of the lenders mentioned above: refinancing is a great opportunity to lower your monthly payments, shorten your loan term or get some cash.



How to refinance your auto loan and save thousands of dollars


As the study above suggests, we found a wide range of auto loan companies that are great candidates for refinancing. While the 20 biggest lenders hold 50% of all auto loans, we found that especially refinancing Captive finance, Speciality financing and Buy Here Pay Here loans promise huge savings. Average interest rates for Captive finance, Speciality financing and Buy Here Pay Here loans range from 10% - 25%.


Haven't explored refinancing yet? WithClutch.com is a fully digital platform that lets car owners like you do so from the comfort of their own home. No need to set a foot in a bank or credit union. You can lower your rate or get cash in as little as 20 seconds.


Follow three simple steps to refinance your auto loan, get approved in seconds and save thousands in minutes.

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