Hede: Analysis of 2007 Financing Portends Weak Totals for ‘08
With similar sales and credit dynamics in 2006 and 2007, it’s no wonder auto financiers’ portfolio growth last year mirrored increases the year prior.
Much like in 2006, auto financiers bolstered their portfolios last year despite slowing vehicle sales, according to the annual Auto Finance Big Wheels ranking of the top 100 car lenders and lessors in the nation. Stable — and relatively low — interest rates and steady incentive spending contributed to that growth. In essence, credit fueled sales.
Overall, total outstandings among the nation’s top 100 financiers climbed 8.3% to $830.5 billion, despite a 2.6% decline in vehicle sales volume. By comparison, 2006 loans and leases outstanding increased 8% while vehicle sales fell 2.4%.
For 2008, though, the outlook is dimmer. Vehicle sales may top out at only 11 million or 12 million this year, down from 16 million in 2007. At that rate, auto finance outstandings could drop into the mid-to-upper $600 billion range among the top 100 companies. And portfolios in 2009 will likely compress further as financiers shear loan originations and some back out of leasing altogether.
Marketshare shifts will certainly be in the forecast for 2008, as well. In both 2006 and 2007, marketshare by lending segment remained nearly identical. Captive finance companies accounted for 57% of total outstandings, banks snared about 35%, and credit unions took 5%. Independent finance companies, largely nonprime players, accounted for the remaining 3% of marketshare. For 2008, though, the captives will almost certainly lose ground to credit unions.
For 2007, Ford Motor Credit Co. and GMAC LLC retained their positions atop the financier ranking, with $109 billion and $100.7 billion of receivables, respectively. Toyota Motor Credit Corp. overtook Chrysler Financial as the No. 3 lender last year. Toyota’s portfolio grew 14% to $61.2 billion.
USAA Federal Savings Bank, Hyundai Motor Finance Co., and Santander Consumer USA recorded the largest growth in 2007; Mercedes-Benz Financial, The Golden 1 Credit Union, and Popular Auto Inc. booked the greatest portfolio declines.
Among the top 100 financiers, a dozen bolstered their portfolios at least 20% last year, compared with 18 financiers in 2006. As in 2006, six of the 20 fastest-growing companies were credit unions.
Other stats: Overall, the average portfolio size was $8.3 billion; the median was $1.2 billion. Among credit unions, average portfolio size was $932.7 million.