OneMain Financial Drives Record Direct-Auto Originations

OneMain Financial reported a “record quarter” for originations, driven by strength in its direct auto product and “increased conversions in applications from better credit quality customers,” President and Chief Executive Jay Levine said on the company’s second-quarter earnings call today.

The direct lender does not break out originations numbers for any of its products including personal loans, debt consolidation, and home improvement, but Levin said auto comprised 24% of the company’s total originations in 2Q, up from 18% in the fourth quarter of 2016.

“We are not in the auto finance business as the industry generally defines it,” Levine said back on the company’s first-quarter earnings call. “Our basic loan product continues to be the traditional installment loan, which — in certain cases — may be secured by the borrower’s title vehicle. Our loans are underwritten against the borrower’s ability to repay, and the presence of collateral serves to reduce the bulk frequency with law severity eating much less in the back.”

Although many are looking at the impact depreciating used-car values will have on residual values, Levine said, “We repossess relatively few vehicles, so changes in the used-car prices have very little impact on our total losses.”

Secured loans — which include auto — accounted for 47% of total originations for the second quarter, up from 43% the same time a year prior.

“Secured loans, including almost $2.5 billion of direct auto loans, now represent 40% of our total portfolio,” Levine said.

OneMain introduced direct auto lending in December 2015, and by the end of April 2016 it was originating direct auto loans across all of its branches.

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