The economic impact of automobile and personal loans is larger in Texas than any other state, according to new data.
Crunching data from 2023, Oxford Economics, a U.K.-based research firm, estimated overall economic footprints, using models that calculated what the researchers classified as direct, indirect and induced impacts.
For vehicle loans, that included the economic impact of vehicle finance providers — everything from the direct impact of lenders’ payrolls to indirect impact from additional suppliers, such as banks, and induced impact from employees’ spending.
“Dallas and the Dallas-Fort Worth area have become really kind of a headquarters for vehicle finance in this country,” said Celia Winslow, president and CEO of the American Financial Services Association (AFSA), the national consumer credit industry trade group that commissioned the reports.
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The analysis also counted the economic impact of the automotive sector that came through auto financing: In 2023, financing represented 44% of the overall dollar value of U.S. vehicle sales, according to Oxford Economics.
For personal loans, the methodology included impact from finance companies’ direct spending, associated domestic supply chains and employees’ broader spending.
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Texas on top
In both studies, Texas ranked first. Researchers found that the personal lending industry contributed $2.9 billion to Texas’ economy in 2023, surpassing the impact in California, which was measured at $2.5 billion. Florida, Georgia and New York, with much smaller impact estimates, rounded out the top five.
But in the world of vehicle financing, Texas looms even larger: The state saw an impact of a whopping $18.4 billion from the industry, researchers calculated ― or nearly $6 billion more than the impact in California. Florida, Georgia and New York again rounded out the top five.
Given Texas’ large population and estimated 26 million vehicles, it’s not surprising the state would rank near the top.
But the report also illustrates how Texas, with its famously booming economy and growing, car-dependent metro regions, has also emerged as the nation’s vehicle loan capital: In 2023 Texas saw over 3 million new auto loans, or over 10% of the nation’s total. It also ranked first among all states in terms of vehicle financing value per capita, according to AFSA.
The high vehicle loan activity comes in part from “the overall economic prosperity of the state and just [its] far flung nature,” said Timothy Gill, AFSA’s vice president and chief economist.
But it also comes from the state’s ― and especially D-FW’s ― emergence as a national hub for the vehicle loan industry itself. Numerous loan companies are now based in the area, including many of the country’s largest, such as the auto finance divisions for Toyota, General Motors, Chase and Capital One.
“So Texas is, I would say probably unique among the states in having both a large vehicle market,” added Gill, “but then also having a pretty significant number of the finance companies located there as well.”
The state’s hub as an auto loan capital also comes with downsides. Another study, published earlier this year by the website WalletHub, found that Texans’ median car loan debt was over $23,000 — the highest figure for any state, with Texas also ranking as the sixth most economically burdened state when WalletHub divided car debt figures by residents’ median earnings.
The high auto debts can also present a risk to both consumers and lenders: Last month, Tricolor, an Irving-based subprime auto lender that operated more than 60 dealerships across the country and catered to Latino customers, abruptly filed for bankruptcy amid fraud allegations.
Yet for years the state’s growing lending industry has also played a major role in supporting Texas’ large economic success story, argues Gill: “It’s certainly been a significant factor in the growth and diversification of the Texas economy,” he said.