You've found the perfect car, now all you need is a loan. Some of Wall Street's largest banks are stepping up in order to gain a bigger share of the auto-lending market from the traditional brand-related captive finance companies. Here are the top three reasons your next loan is more likely to come from a Wall Street bank than the traditional auto lenders.


1. Not getting any younger
When the financial crisis hit, it was no surprise that consumers held onto their vehicles longer than they had historically. But even now, the average age of vehicles on the road is topping 11 years -- a near record for the country. As my fellow Fool Morgan Housel noted in his recent article, the current level of sales for autos per household is well below the historical average and due for a boost.

The seasonally adjusted annual rate of light vehicle sales rose to 16 million units in August, the first time the measure of consumer vehicle sales has met this mark since 2007. During the hardest times of the financial crisis, the SAAR fell as low as 10.4 million units. Even with the boost in sales already headed to pre-recession levels, the fact that the nation's fleet of cars on the road is aging remains a strong indicator that new financing will be needed in the quarters to come.

With sales finally coming back in line with historical trends, three of the top bank lenders reported record auto loan originations in the second quarter this year.

BankOriginations ($)% Change vs. 2012
Wells Fargo (NYSE:WFC) $7.1 billion 9%
JPMorgan Chase (NYSE:JPM) $6.8 billion 17%
Ally Financial (NASDAQOTH:ALFI) $9.8 billion


Source: Companies second-quarter earnings releases.

2. They already rule the roost
Based on Experian's annual report on the automotive market, banks are already leading the auto-financing war. Of the top 10 auto lenders the mix is evenly split, but banks own more than 21% of the total consumer financing in the market, while captives top out at 19%. The top five lenders is more telling, since only Toyota and Ford (NYSE:F) join the three banks listed in the table above. Capital One and Bank of America (NYSE:BAC) are the banks in the bottom half of the top 10 lenders.

3. Creative financing
What people look for in auto lending has been changing over the past year. According to Experian, consumers are looking for longer loan terms, increased amounts of financing, and fewer leases.

Though banks have been criticized for their strict credit underwriting of mortgages, it doesn't appear to be the same for auto loans. Banks are becoming increasingly more tolerant of sub-prime auto lending, while captive finance groups are staying away from that segment of the market. Banks also command the market space for used-auto lending, which is not a specialty of the captives, who focus on new vehicle sales or leases.

Speaking of leases, the demand for loans is much higher, with 87% of vehicles financed during the first quarter of 2013 sold versus leased -- this is a 12% increase from the same time last year. Since captive finance groups dominate the leasing business, with only JPMorgan's Chase division and Ally (the former GM captive) competing in the top 10 list of lessors, there's going to be some pressure on their profitability if customers continue to choose purchasing rather than leasing.

Overall, the captives have a small lead on the nation's banks in the new-vehicle loan segment, but if interest rates continue to stay at near-historic low levels, the banks may gobble up some market share with competitive terms.

Competitive drive
As the automotive market continues to recover from the financial crisis and its side effects, Wall Street's banks have a great opportunity to generate more loans and gain some more market share. With interest rates at such low levels, they can continue to offer tempting terms and compete with the advertised rates of the nation's automotive companies and their captive finance companies.

Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Bank of America, Ford, and Wells Fargo. It also owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.