As vehicles idle on dealers’ lots, auto lenders face slower repayment of their floorplan loans.
Nissan Motor Acceptance Corp., for one, has been in breach of a floorplan trigger since February, when its three-month payment rate dropped below 35%. As such, NMAC had to increase credit enhancement levels in its floorplan trust.
Ally Financial, Ford Motor Credit, GM Financial and Mercedes-Benz Financial Services also have seen floorplan payment rates decline. MBFS posted the biggest decline — 14.9 percentage points year over year — to 40.7% as of March 31, according to a new report from Moody’s. MBFS’s payment rate trigger is 37.5%.
Ally’s floorplan payment rate dropped 4.3 percentage points to 28.7%. Ally has a three-tier trigger, the highest of which is 25%. Meanwhile, Ford Credit’s average payment rate fell 3.5 percentage points to 34.7%, nearly 10 percentage points higher than its 25% trigger. And GM’s payment rate declined 1.9 percentage points to 42.2%. It, too, has a three-tiered trigger, the highest of which is 25%.
Typically, dealers reduce inventory as vehicle sales slow, thereby bumping up payment rates. For instance, in the previous recession, ABS floorplan payment rates increased 6.5 percentage points from the fourth quarter of 2008 to the first quarter of 2009, according to the Moody’s report. That increase came despite a 12% decline in new-vehicle sales.
NMAC’s monthly payment rate already is edging up. It gained 3 percentage points in May to 37.6%, according to Securities and Exchange Commission filings. Should June’s payment rate come in at a similar level, the captive will once again be in compliance with its floorplan trigger.
Seasonality also is working in floorplan lenders’ favor, as vehicle sales tend to tick up in the second and third quarters, said Nick Monzillo, the Moody’s analyst who authored the report.
Among the lenders tracked by Moody’s, Hyundai Capital America was the only one whose monthly payment rate increased year over year. The rate improved 1.1 percentage points to 40.7%. While Monzillo could not attribute the higher payment rate to any specific factor, he noted that payment rates could vary based on sales incentives.
Here’s a summary of floorplan payment rates for Ally, Ford Credit, and NMAC, based on SEC filings:
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