BOSTON — Performance is starting to show “a little bit of weakness,” in the subprime auto space, Ismail “Izzy” Dawood, chief financial officer of Santander Consumer USA, told attendees at the AFSA Credit Summit for Fixed Income Investors Thursday.
“Since late Q3[15], early Q4, the top 20 lenders — I’m talking about subprime primarily — the top 20 lenders have lost marketshare, relative to all the other lenders,” he said. “And we’re talking about 1,000+ other lenders in the space, it’s a pretty fragmented market. A lot of it has to do with the larger lenders seeing the data and not making loans in certain tiers. But the smaller lenders, who don’t have the data, continue to make those loans.”
SC can approve a loan in about eight minutes, Dawood said, but for lenders that lack the resources and technology to do the same, approval time is about 20 minutes. “The ones that are more efficient and get ahead of you, say no to the loan and you’re the last one there, you’re going to get the loan, so it’s by default,” he said. “A lot of the capture is going to smaller lenders that way, as well.”
The industry will have to “see how long that last,” because liquidity, primarily in the capital markets has also become a concern, according to Dawood.
“We keep on hearing about it, and reading about – as well as spending performance, it’s starting to show a little bit of weakness, particularly in the deeper subprime space,” he said. “That trend hasn’t really stopped since late Q3.”
