Exploring the Future of Captive Finance: A Conversation with Jeff Paul

June 4th, 2024 | by Angela Simoes, Communications Director | Posted in: Insight on Things

In a recent episode of the Mile Marker podcast, I had the pleasure of talking with Jeff Paul, a leader in the automotive captive finance sector and the managing director at Deloitte Services. Our discussion delved into the evolving role of OEM captives, their current challenges, and their future in the automotive industry.

Jeff Paul joins the Mile Marker Podcast

The World of Captive Finance

Jeff provided an insightful overview of captive finance organizations. These entities, owned by industrial companies like car manufacturers, finance and lease vehicles for OEMs, both to consumers and dealerships through commercial lending and floor planning. This relationship helps facilitate vehicle movement in an economically efficient manner.

The Future of Captives

Our conversation highlighted the evolution of OEM captives, sharing insights from Deloitte’s study, “The Future of Captives,” projecting the industry’s future by 2030. The study indicated an accelerated market change, leading to a follow-up study focusing on automotive mobility by 2035. This study identified significant shifts, such as the rise of electric vehicles (EVs) and the expanding role of captives in offering services like insurance and EV charging.

An Evolving Landscape

Jeff emphasized the younger generation’s preference for the latest technology, driving the shift toward leasing and subscription models. Gen Z consumers favor flexible ownership models, allowing access to new technology more frequently. This presents captives with opportunities to adapt and offer bundled services, including maintenance and insurance.

Also highlighted were the impacts on the B2B side, particularly in fleet management. Traditionally, vehicles coming off lease were auctioned if dealers didn’t purchase them. Now, captives have the opportunity to refurbish and repurpose these vehicles for multiple leasing terms, fostering brand loyalty and providing more affordable options.

Image of cars at dealership, financed by an OEM Captive

Jeff also discussed the importance of new digital systems and skill sets to manage this shift. OEM captives are investing in technology platforms and leveraging telematics data to enhance customer service and operational efficiency. AI’s role is growing, helping captives become proactive and agile in addressing consumer needs.

Regulatory landscapes, especially concerning environmental and privacy issues, are also evolving. Jeff noted that Europe is ahead of the US in regulatory developments, but both regions will see changes as the industry adapts to new technologies and business models.

Opportunities Ahead

We explored the potential for OEM captives to enter the fleet management and car-sharing markets, traditionally dominated by fleet management companies and rental services. Opportunities for OEM captives to provide new services, such as insurance at the point of sale and EV infrastructure, were discussed, showcasing their expanding role in the mobility ecosystem.

My discussion with Jeff offered a comprehensive look at the dynamic changes in the captive finance sector. The future holds exciting opportunities for OEM captives to innovate and adapt, driving new revenue streams and meeting the evolving demands of consumers and businesses alike. Stay tuned for future updates as this industry continues to transform rapidly.

Watch or listen to my conversation with Jeff on the Mile Marker Podcast.

Angela Simoes, Communications Director

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