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Captives' Financing Share Continues to Slip

August 16, 2005

WESTLAKE VILLAGE, Calif. -- Captive finance companies have been losing their share of new-vehicle finance and lease business for four years, but the rate of decline has increased during 2005, according to Power Information Network executives.

Since 2002, captives share of the finance market has fallen from 66.9 percent to 63 percent in 2005, on a year-to-date basis. Based on PIN transaction data, captives handled less than 60 percent of the finance and lease business in June and July, an report said.

PIN executives cited three reasons for the trend.

Banks, independents and credit unions have lowered their buy rates from 18-29 points on General Motors, Chrysler and Ford loans, while many captives have raised their rates.

Captives have traditionally controlled much of the leasing, but 2005’s summer discounts have triggered a decline in that segment. Ford Credit’s lease penetration rates have fallen 16 percent, GMAC has recorded a 14 percent drop and Chrysler Financial rates are down 2 percent.

Finally, employee discounts have reduced the bonus cash incentives for captive financing, making captives less competitive with banks and independents, according to the report.

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