We’re buying cars more often and we’re spending more money to buy them. But that doesn’t mean every lender is jumping into the pool. In fact, the contrasting strategies of two major banks, Wells Fargo and Chase, demonstrate that even among the biggest of financial institutions, there’s disagreement over auto loans and where and how to finance.
Let’s start with Wells Fargo. Despite what you might think, the bank, the fourth largest in the US, is actually stepping back from auto loans. In fact, it’s actually moving away from the industry at a surprising rate; not only did the company originate fewer loans this quarter than at the same time last year, this is the second quarter it did so, and the decrease was more notable.
Why? Part of it is simply that Wells Fargo has been very gung-ho about auto loans in the past. The company has originated $53 billion worth of loans during the last few years, with the overall total of originations up 7%. It’s very easy for us, as consumers, to forget that banks view these loans as products, where the price you pay is the interest you deliver, and Wells Fargo appears to be concerned that they’re not making quite as much money in the market as they could.
In other words, it’s less that Wells Fargo sees any problem in the upcoming auto loan market. Simply, as a company, they clearly think they’ve invested enough, for now, and will wait to see where it takes them. And then there’s one of Wells Fargo’s biggest competitors, Chase.
Chase, another of the “Big Four” banks, has taken the exact opposite strategy. Where Wells Fargo is concerned about thinning margins on auto loans, Chase is aggressively pursuing more loans. Their overall loan originations are up by 9% from this period last year, and their total originations are up 5% overall.
Chase appears to be more interested in volume than in maximizing how much they get out of each individual loan. They already have more originations than Wells Fargo, at $55.5 billion, and their financial guidance states that they see enormous opportunities for expansion and growth. In short, they’re taking the “bulk buy” strategy; the more profitable loans they issues, the more money they believe they’ll make in the long term.
It’s interesting from a financial perspective, of course, but the question every auto loan shopper has is: What does this mean to me? The answer is simply that you have to know who’s making loans.
The Right Loan
While auto loans are growing rapidly, and even those of us with poor credit can easily secure one, that doesn’t mean that all lenders are going to issue loans. In order to get the most out of your loan, make a point of applying to as many lenders as possible, using networks like Federal Auto Loan. The more lenders you put your application in front of, the more likely you are get the best range of quotes … and the more likely you are to get the right car loan, no matter which banks are originating loans.