The ratio of franchise dealer originations in Westlake Financial Services‘s securitizations is on an upward trajectory, according to a recent DBRS presale report.
In Westlake’s most recent securitization, an $800 million transaction slated to close Feb. 20, franchise dealer originations account for 38% of the pool. By comparison, franchise originations hovered at 30% in the lender’s June 2017 securitization.
“The rate of growth has increased dramatically for the franchise dealers,” DBRS wrote in the report.
Westlake’s partnerships with RouteOne in 2011 and DealerTrack in 2012 accelerated the lender’s business in the franchise sector. In 2016, Westlake announced its availability on RouteOne’s e-contracting platform. Shortly after, Westlake’s built an e-contracting system into its Dealer Center portal that rolled out to all 50 states by 2017.
The credit quality of the collateral and performance of the auto loan portfolio differ for loans originated by franchise versus independent dealers, the presale report said. On the whole, independent dealers typically finance higher mileage vehicles; the loans have shorter maturities, lower loan-to-value ratios, and higher loss rates.
The cumulative net loss rate for the securitization is 13.52%, with 5.20% expected to come from the franchise business, the report said.