With a recession on the horizon, Consumer Portfolio Services Inc. is “putting away acorns for a rainy day,” President and Chief Executive Charles Bradley told attendees at the 2016 Auto Finance Summit.
The next recession won’t hit tomorrow, but “the problem is you don’t know when,” which is why CPS has $300 million of funding across three credit facilities, he said. CPS built two-year revolving credit lines with a one-year amortization period, and “it’s not a coincidence,” Bradley said.
The company utilizes a year-long amortization as a backup to “weather” any impending downturns, he said. “If for some reason you can’t securitize and clear those lines, they continue on for another year — almost like a securitization,” Bradley added. “I personally feel like there is a recession [coming]. Being in subprime lending, our customers don’t have a ton of disposable income, so we can see quickly when their payments are late, delinquencies go up a little bit, and sales drop — in terms of what we are buying,” he said. “Those things are poking around, to where you might think we are getting closer to a recession.”
In terms of running a company, one of the most important thing is to guess when the next recession is, he said. “If you can figure that out, you can be way ahead of the game. Of course you can’t do that. But you can prepare.”
