Wanted: Auto Finance Rivalries

Coke vs.Pepsi. Apple vs. Microsoft. McDonalds vs. Burger King. 

The corporate world is often fueled by rivalries, companies who compete against each other for marketshare, top-dog status, and the unofficial title of the most cool and innovative.

In auto finance, the biggest rivalry used to be between banks and credit unions. I can remember an Auto Finance Summit event  years ago where a roundtable discussion session talking about the differences between banks and credit unions nearly turned into a shouting match as both sides spent the time pointing out all the reasons the other group had it better. Credit unions do not pay taxes so could therefore offer better pricing, executives from banks complained. Banks had cheaper costs-of-funds, credit union executives lamented, and could therefore offer better pricing. The two sides went back and forth for nearly an hour.

I came across an article recently that shared a unique perspective about how creative rivalries can spark innovation and a competitive fire. The article notes that runners often run up to five seconds per kilometer faster when one of their rivals is entered in the same race. 

Reading that article, I wondered where the competitive rivalries in auto finance existed today. They definitely exist at local dealerships, where lenders — banks, credit unions, and finance companies — battle one another for loan applications from consumers. And while that does often spark competition, such as price wars, those rivalries are too localized to bring about innovation within the auto finance industry.

I’m not saying that the auto finance industry needs people to develop a white-hot burning hate for one another in order for it to thrive. For example, the distance between Ally Financial and Toyota Motor Credit Corp. for the top spot among auto lenders is razor thin. That’s a great place for the industry to start.

The article I mentioned above cites how while Michelangelo was hired to paint the ceiling of the Sistine Chapel, Raphael was commissioned to design the tapestries in the famed church. Knowing that his work was going to hang underneath his rival’s, Raphael pushed himself to “creative brilliance.”  Creative brilliance sounds like something that the auto finance market could benefit from.

Coke vs.Pepsi. Apple vs. Microsoft. McDonalds vs. Burger King. 

The corporate world is often fueled by rivalries, companies who compete against each other for marketshare, top-dog status, and the unofficial title of the most cool and innovative.

In auto finance, the biggest rivalry used to be between banks and credit unions. I can remember an Auto Finance Summit event  years ago where a roundtable discussion session talking about the differences between banks and credit unions nearly turned into a shouting match as both sides spent the time pointing out all the reasons the other group had it better. Credit unions do not pay taxes so could therefore offer better pricing, executives from banks complained. Banks had cheaper costs-of-funds, credit union executives lamented, and could therefore offer better pricing. The two sides went back and forth for nearly an hour.

I came across an article recently that shared a unique perspective about how creative rivalries can spark innovation and a competitive fire. The article notes that runners often run up to five seconds per kilometer faster when one of their rivals is entered in the same race. 

Reading that article, I wondered where the competitive rivalries in auto finance existed today. They definitely exist at local dealerships, where lenders — banks, credit unions, and finance companies — battle one another for loan applications from consumers. And while that does often spark competition, such as price wars, those rivalries are too localized to bring about innovation within the auto finance industry.

I’m not saying that the auto finance industry needs people to develop a white-hot burning hate for one another in order for it to thrive. For example, the distance between Ally Financial and Toyota Motor Credit Corp. for the top spot among auto lenders is razor thin. That’s a great place for the industry to start.

The article I mentioned above cites how while Michelangelo was hired to paint the ceiling of the Sistine Chapel, Raphael was commissioned to design the tapestries in the famed church. Knowing that his work was going to hang underneath his rival’s, Raphael pushed himself to “creative brilliance.”  Creative brilliance sounds like something that the auto finance market could benefit from.