“There is good [loan] term and there is bad term,” Jason Kulas, president & chief financial officer, Santander Consumer USA, said during a CEO panel discussion at the American Financial Services Association’s 19th annual Vehicle Finance Conference Thursday, when asked about the potential problems resulting from longer loan terms – both new and used.
Tim Russi, president, Auto Finance, Ally Financial, joined Kulas on the panel, which kicked off the third and final day of the conference.
The majority of the longer term loans are not a result of dealers advising customers to get a 60-month loan and buy a less expensive car, or get a 72- to-80 month loan and get a more expensive car, Kulas said.
“That’s another conversation,” Kulas told the audience. “That’s not what we’re seeing.”
In other words, customers are sticking with the vehicle they decided on when they entered the dealership, rather than changing their mind based on loan terms. If the longer loan terms can help them afford the car they want, they might consider it.
Quality is key, Russi added, and the vehicles now entering the market have much better potential to last out the life of a longer loan.
Russi also referred to the rising number of auto recalls in recent times as another form of quality improvement, in spite of how painful it has been to watch.
General Motors led recalls in 2014 with over 26 millions cars effected, according to GM’s website.
Russi confirmed that Ally would continue to extend longer-term loans to quality customers purchasing quality cars. “That’s not a bad thing,” he said. “It’s a natural evolution.”
