We recently compiled a comprehensive report detailing the 25 States with Most Auto Debt Per Capita in the US. In this article, we’ll be taking a look at the auto finance industry and the state with the most auto debt per capita in the US.
The US Auto Finance Industry
The United States auto finance market has seen significant shifts in recent years, shaped by a range of economic, technological, and regulatory factors. It seems that delinquencies are on the rise among auto borrowers in the US, leading to a surge in auto loan debt. Data from the New York Federal Reserve shows that the percentage of US auto loans that are 90 days or more delinquent rose above pre-pandemic levels, climbing to 2.66% in the fourth quarter of 2023. The auto loan balance increased by $12 billion in the quarter to reach a total of $1.607 trillion as of the end of 2023.
According to a recent study by credit reporting agency TransUnion (NYSE:TRU), weaker consumer budgets are negatively impacting loan payments for some automobile borrowers in the United States. Amid inflationary pressures, consumers have become more cautious with big-ticket purchases, leading to continued declines in auto loan applications since the pandemic. Despite the recovery in supply chain issues, elevated inflation and higher interest rates have put consumers in a tight financial position, further straining affordability and spending. As a result, the US auto finance market is facing rising delinquencies, stricter lending standards, and reduced demand.
Top Auto Loan Lenders in the US
According to S&P Global Market Intelligence, the top 25 auto lenders presented a mixed performance in the fourth quarter of 2023, with 9 lenders recording sequential increases in their portfolios while 16 experienced quarter-over-quarter declines. Ally Financial Inc. (NYSE:ALLY) surpassed Capital One Financial Corporation (NYSE:COF) to become the US bank with the highest auto loan balance, despite both companies seeing a quarterly drop. However, Ally Financial Inc.’s (NYSE:ALLY) 1.2% decline was less than Capital One Financial Corporation’s (NYSE:COF) 1.8% decrease.
Ally Financial Inc. (NYSE:ALLY) held a total auto loan balance of $74.18 billion as of the end of 2023, narrowly surpassing Capital One Financial Corporation’s (NYSE:COF) auto loan balance of $74.08 billion during the same period. JPMorgan Chase & Co. (NYSE:JPM) rounded out the top three with a total auto loan balance of $63.65 billion, reflecting a 1.5% quarter-over-quarter increase.
Is Capital One Financial Corporation (COF) a Good Buy Right Now?
Capital One Financial Corporation (NYSE:COF), one of the largest publicly traded financial companies in the US, offers a range of financial products and services. It specializes in credit cards, auto loans, and banking. Through its subsidiary Capital One Auto Finance, the corporation offers financing for the purchase of new and used vehicles, as well as refinancing of existing auto loans.
As a major player in the US auto finance market, Capital One Financial Corporation (NYSE:COF) is leveraging technology to disrupt the industry. Capital One Auto Finance utilizes real-time data analysis, AI, machine learning, and cloud computing. In 2023, the corporation introduced the Navigator Platform, a digital tool that helps dealers provide a more transparent and personalized financing experience for car buyers. Buyers can use the platform to browse through dealers’ inventories. By partnering with lenders, the platform can pre-qualify most applicants, enabling them to create an offer using real rates and payments. Amid industry challenges, Capital One Financial Corporation (NYSE:COF) is using technology to bridge the gap between buyers and dealers, delivering a seamless and transparent financing experience.
In February, Capital One Financial Corporation (NYSE:COF) entered into a definitive agreement to acquire Discover Financial Services (NYSE:DFS) in an all-stock transaction valued at $35.3 billion. Ariel Investments, an investment management company, in its first quarter 2024 investor letter said:
“We also added global financial services company, Capital One Financial Corporation (NYSE:COF). The company is the largest online consumer and commercial bank with a leading position in general purpose and small business credit cards. We view the company as competitively advantaged particularly due to their investment in technology. According to recent reports, COF is also rated as one of the leading banks within Artificial Intelligence (AI). Notably, the company recently announced an acquisition of Discover Financial Services (DFS) which we believe would produce significant long-term earnings accretion. COF will be able to leverage DFS’ proprietary payments network, enabling direct interaction with merchants and consumers. This closed loop dynamic should lead to higher volumes of credit card conversions presenting further upside for its shares. At current levels, we view the long-term outlook to be attractive, given favorable business trends, stabilizing delinquency rates within the credit card industry, synergies from the DFS acquisition and COF’s enhanced focus on technology.”
As per Insider Monkey’s database, the number of hedge fund portfolios with a position in Capital One Financial Corporation (NYSE:COF) increased to 54 in the first quarter of 2024, up from 51 in the previous quarter.
Capital One Financial Corporation (NYSE:COF) has gained 26% over the past 12 months as of July 1, and analysts’ 1-year median price target points to a further 12% upside. COF does not look cheap nor expensive while it trades at 10x its forward earnings (sector median = 10x). For 2024, analysts anticipate Capital One to grow its non-GAAP EPS by 8.7%.
While we acknowledge the potential of Capital One Financial Corporation (NYSE:COF) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Now that we have discussed what’s going on in the US auto finance market, let’s take a look at the state with the most auto debt per capita in the US.
A customer signing a loan agreement with the bank’s representative in a private office.
Methodology
We compiled a list of 25 states with the most auto debt per capita in the US. To collect data for our list, we consulted the Federal Reserve Bank of New York, which forms part of the central banking system of the United States. This database provided us with details on the auto debt balance per capita by state in the fourth quarter of 2023. We used the latest data available in their dataset to rank the 25 states with the highest auto debt per capita in the US. The state with the most auto debt per capita in the US is listed below.
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The State with the Most Auto Debt Per Capita in the US
1. Texas
Auto Debt Balance Per Capita: $7,810
Texas, in the South Central region, tops our list of the 25 states with the most auto debt per capita in the US. Texas is the second-largest state in the US by both population and land area. It is home to a thriving automotive manufacturing sector. As the state with the highest auto debt per capita in the US, Texas has an auto debt per capita of $7,810. This is almost $1,000 more than the state with the second-highest auto debt per capita.
Want to learn more about the states with the highest auto debt per capita in the US? Check out our comprehensive report detailing the 25 States with Most Auto Debt Per Capita in the US.
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