LAS VEGAS — Rises in lease return volume and negative equity are putting downward pressure on recovery values in the subprime sector, said Ben Miller, senior vice president and treasurer at Exeter Finance Corp.
“The recovery issue is real,” Miller said while speaking on a panel at SFIG 2017 last week. “There’s going to be a lot of vehicles coming back off lease, and the last couple of months we have seen recovery values lower than probably where they were a year ago.”
Overall, the subprime auto industry is going to have to tighten some of its underwriting standards to reflect current market conditions, Miller said. “That’s when you have to look at the underwriting side and say, ‘I’m willing to accept a certain Fico,’ but you’ve got to go a couple layers deeper and say, ‘within a certain Fico band, how much LTV am I willing to lend, how much DTI, how much PTI,’” Miller said. “If you focus on those, there are ways you can tighten up on credit and if that means that maybe you’re keeping your business flat or
moderately growing, then that’s what it is.”