Depreciating used-vehicle values might initially attract consumers, thanks to affordable prices, but Bellco Credit Union is more concerned about long-term residual value effects on its 66% used-vehicle portfolio, said Senior Vice President and Chief Lending Officer John Ruby.
While the Denver-based credit union hasn’t made any drastic strategic shifts yet, if manufacturer incentives continue at the levels they have — an all-time high of $3,700 on average for new vehicles at yearend 2016 — “that would cause us to reevaluate our actions and strategies,” he told Auto Finance News. “What’s tough in any market is when things are moving up or moving down. That whole nature of movement can create confusion and disrupt things.”
With higher incentives pushing down used prices, lenders will need to stay vigilant for negative equity deals, he added. “You may have someone who has a car that in January was worth $10,000, and in June it’s worth $9,000,” Ruby said. “Not just because it’s six months older, but because the market has moved downward.”
With auto outstandings of $1.3 billion at yearend 2016, Bellco has grown its portfolio by more than $300 million year over year by sticking to its underwriting standards in a growing Colorado economy.
