Expect end-of-term auto leasing losses to stabalize, or dip slightly, in 2009 at US Bancorp, sources tell me. Apparently, that’s the bank’s internal forecast.
Last year, US Bancorp took $250 million of EOT losses. US Bancorp is the nation’s 17th-largest auto financier, according to our Auto Finance Big Wheels report. It ended 2007 with about $6 billion of auto leases outstanding.
Which is why many of us believe the opportunity for non captive lease lenders is in pre-owned! The captives don’t compete well in pre-owned and depreciation is much less volatile. Residuals are much easier to predict and there is new technology from Chrome that enables lenders to determine the original equipment on a pre-owned vehicle based on OEM info based on the VIN. At CyberCalc we have developed a tool for lenders to use to identify and correct residual vulnerabilities before they release their programs.
David, could you define “residual vulnerabilities”?
Under normal circumstances lease lenders release their programs every two months. This coincides with ALG’s residual guide which is published 6 times per year. We provide a report that compares current wholesale values based on Black Book and auction transaction data with a lenders residuals to help them identify where they might inadvertently be buying excessive risk. We also provide consulting services to help them interpret the data we provide.
I appreciate your asking the question. Please let me know if there is any further clarification I can provide.
David,
One more question. When you say “pre-owned depreciation is much less volatile” do you have any actual data to support this other than anecdotal? The reason why I ask is I am building a mathematical risk model and I am assuming that the monthly depreciation rate statistical variance is the same new or used. If this is not the case then I would like to know but I need actual data to support this. It would seem that since ALG is the “Residual God” then they would have this kind of data but as it turns out they are worthless when it comes to this kind of stuff.
Huge news. Wonder what aspects of the AmeriCredit business will be leveraged the most.