Replies to This Discussion

Permalink Reply by JJ Hornblass on November 5, 2009 at 12:05pm

I think the first question is, how do you quantify the need for new nonprime lenders? And I am not sure what the answer is today. There are so many variables at play, and even gaining visibility on the current nonprime credit supply is no easy feat. In other words, quantify the supply and you can gauge whether there is a need.

Permalink Reply by Marcie Belles on November 5, 2009 at 12:17pm

One way to quantify supply is via the dealer base. Are dealers able to secure appropriate financing for car buyers on their lots? What niches (i.e., consumer demographics) are under-served?

Permalink Reply by DebbieE on November 5, 2009 at 12:26pm

I think the need for subprime lenders will always be needed however, I feel that the regulatory agencies are making it very difficult to become pro active in this industry by scrutinizing sub-prime portfolios to the point of discouragement from the lender side. With loan decisions being based largely on the FICO score, I think we are going to see alot more sub-prime loans, espcially after this foreclosure fiasco and the effect it had on people's credit reports.

Permalink Reply by Steve Rabago on November 6, 2009 at 2:55pm

Steve Rabago said:

I am not sure I would consider myself and industry executive more industry outsider and would agree that there is an opportunity for nonprime/subprime lending. Dealers have to have more skin in the game to make it work. They'll need to take more responsibility for keeping better records for lender due diligence. Our platform at www.zimpleauto.com addresses some of the above mentioned opportunities. Dealers making non-prime loans in a more responsible way - not dissimilar to what we are seeing in the mortgage marketplace. Lenders actually doing underwriting, confirming employment, income and expenses - novel! We have a free white paper on the www.zimpleauto.com web-site that discusses 5 ways to assess credit risk.

Permalink Reply by Timothy Dugan on November 8, 2009 at 9:22pm

If you listen to the dealers they would like every customer to be given a loan. Of course there is a desire for additional sub-prime lenders from the dealers - they need all the help they can get to sell cars. I guess the real question is if there can be a viable portfolio in new sub-prime lending or is the risk too high for the reward. I'm not sure that capitalizing a sub-prime auto portfolio would be easy right now.
Personally I always thought that consumers can always forclose on their mortgage and find a rental - affordable transportation is a requirement for most to get to work etc. They can always live in their car, but cannot drive a house to work. Sub-prime auto loans with good ethical underwriting can and is a profitable endeavor and should be persued by more lenders

Permalink Reply by Joe Bruner on November 18, 2009 at 6:07am

Timothy is right; without a vehicle to get to/from work many jobs across the country will not be acceptable for the consumer. Take out the need for dealers to have better resources to sell vehicles and look only at the need for transportation to/from work and we see the tremendous benefit for some type of financing for the consumer. Be it leasing, sub-prime, non-prime there is a need and we need to figure out how to satisfy that need......or those going back to work will face problems they just can't overcome.