One of my favorite episodes of “The Simpsons” dates back to the early years. Lisa has taken on the responsibility for anchoring the school’s newscast, only to have her brother Bart, join in. Bart is doing a story about aging veterans and at the end of his piece, he mentions that veterans should have a day to be honored. Lisa, through gritted teeth, replies that there are already two days set aside annually to honor veterans. Without blinking, Bart answers, “Well, they should have three.”
It is in that vein that I make the comment that I don’t think the federal government is doing enough to help the economy, and I have an idea that dovetails very well with the auto finance industry. Ideally, the plan would be for the federal government to offer free auto loans to any small business that needs a vehicle to survive. The approval process could be folded into the Small Business Administration to make it slightly more practical.
A small business could take funds it receives from the SBA and purchase a car, if it’s needed, but a free car loan would be one less step that the companies would have to go through. And it would be a specific program that the government — and the auto finance industry — could hang their hats on to show they are doing what they can to try and boost the economy.
The government could partner with one or more lenders, and make payments on behalf of the small businesses.
If that idea is too pie-in-the-sky, then the program could be amended so that the small businesses would receive car loans with below-market interest rates, and the government would make up the difference between the interest rate offered to the business and whatever the lender’s cost of funds or profit margins are.
In this economy, it’s incumbent upon everyone — the government, industry, individuals — to leave no stone unturned in trying to improve their business and improve the economy. No idea should be too silly to be discussed. It’s never usually the initial ideas that end up being home runs. Flickr, for example, started out as a gaming website.
There are many roadblocks that keep individuals from starting or growing a business. Small businesses could be what pulls the economy out of recession. Why not give them a hand?
Most Indirect auto lending is “collateral lending”. A lender needs to understand car values and be prepared to act fast when borrowers default. Pay or Walk (especially with leases). And they need to work on their repo resale approach to max out the value.
An example of imprudence is that over 20 years ago, almost 50% of the non-business cars on the road in California were leased. I do not know how high it is today. There is no way that 50% of the people in California or anywhere qualify for a lease (OK their FICO scores were artificially inflated due to home equity realizations through sale or refinance to pay their debt on time)-yet some financiers thought so – and the bloodbath continues. It usually gets down to basics – good credit administration, good underwriting, good collateral. Migration to credit models also migrates underwriting to actuarial analysts instead of lenders. Analysts look backward and lenders can look forward.
Not sure whether to laugh or cry.
Did all of those Fannie and Freddie bureaucrats move to the SBA? We would need them to have the correct, educated government staffing in place; and, we could also help the rubber-stamp industry by ordering stamps with “Loan Approved” on the stamper. Maybe also transfer the excess Energy Department bureaucrats because they already have an “APPROVED” stamp with them
On the serious side – all ideas are worthy of consideration. Throw them on the wall and see what sticks!
Maybe someone has a better view point