U.S. Bank’s auto loan originations are increasing, thanks to a strategic shift toward more prime and super-prime loans, said John Hyatt, executive vice president of dealer services.
Hyatt joined U.S. Bank in April 2015 to lead its indirect lending group, which is when the company began its strategic shift. “Instead of focusing on adding more headcount, what we focused on was developing a strategy on prime and super-prime loans, and delivering the service we had in the past,” Hyatt told AFN.
U.S. Bank’s auto portfolio climbed to $16.7 billion in the second quarter, from $15.6 billion in the prior-year period, according to the company’s earnings released in mid-July.
Additionally, U.S. Bank has been cutting back on its 84-month loan offerings since April 2015, and installed “even bigger cuts at the beginning of this year,” Hyatt said. U.S. Bank is “comfortable” with its loan terms now, he said. The bank’s average auto loan term is under 70 months.
“We are still offering it [84-month loan terms], but it’s far more selective,” Hyatt said. “We are offering it to only the best customers — to the best credit-rating customers. If the 84-month term is granted to the wrong customer, it can make them go upside down in their loan and stay upside down for a long time. It’s not good for the dealer, the customer, or the bank.”
As the indirect lending business “heats up,” lenders are looking for revenue opportunities, which often leads them to take risks beyond their credit scoring model, Hyatt said. “If we are looking for loan growth, we don’t loosen credit quality. We improve our service and listen to the customers more, and that’s what’s given us the growth.”
U.S. Bank’s Hyatt will participate in a Leadership Roundtable at the upcoming Auto Finance Summit, Oct. 5-7 at Bellagio Las Vegas. To learn more or to register, visit www.autofinancesummit.com.
