Banks grow auto lending share as interest rates ease, captive incentives shrink

It’s the first time banks have increased their share in over five years.(2 min. read)

Author

Marcus Amick
June 12, 2025

Banks increased their total automotive finance market share in Q1 2025—reflecting a shift in post-pandemic trends where captive finance companies had been steadily gaining ground.

The power shift: According to Experian's State of the Automotive Finance Market Report: Q1 2025, banks captured 26.55% of the auto finance market share in the first quarter compared to 24.79% last year—with captive finance companies (manufacturer financing arms) seeing their market share decline.

  • Manufacturing financing arms dropped from 31.28% to 29.81%, reducing their market lead.

  • Banks now lead used vehicle financing at 28.37%, closely followed by credit unions at 28.24%.

  • It’s the first time banks have increased their share in over five years.

Zeroing in: There were also some notable shifts in the types of vehicles financed—with new vehicle financing ticking up a bit for loans and leases.

  • New vehicles made up 43.29% of automotive financing in Q1 2025, up from 40.90% the previous year—with used vehicles making up the remaining 56.71%.

  • New leasing increased slightly during the first quarter, reaching 24.69%, up from 23.71%.

  • Roughly 10% of all new vehicle transactions were EVs in Q1 2025—with nearly 60% being leases.

Why it matters: As Experian's Melinda Zabritski noted, this "counters many of the trends we observed in the post-pandemic era, where high interest rates and the re-emergence of new inventory allowed captives to push heavy incentives and capture significant market share." This suggests that the interest rate environment is stabilizing and captives are pulling back on aggressive incentives.

Between the lines: The shift from banks to captives coincides with several other positive market signals:

  • 30-day delinquencies improved (1.95% vs 2.10% year-over-year)

  • Interest rates declining (new: 6.73% vs 6.85%; used: 11.87% vs 12.36%)

Bottom line: This realignment of auto lender share will ripple through dealerships nationwide, potentially reducing the availability of promotional financing rates, while forcing manufacturers to find new ways to move inventory without subsidizing loans.

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