Lenders have been keenly focused on the recent unrest in the Middle East, wondering whether oil prices will spike like they did in the summer of 2008. One main consideration of higher gas prices is the ensuing shift in vehicle demand ― to compact cars from guzzlers. Yet a more subtle calculation that lenders have been making lately relates to remarketing.
You see, higher gas prices translate to heftier vehicle transportation costs. Though repossessed and off-lease vehicles have been commanding high prices at auction for a couple years now, rising rates at the pump will start to eat into those profits. Lenders may increasingly refrain from relocating cars to auctions that bring in higher prices, because the costs to transport those vehicles negate the gains.
There has been some easing of oil prices in recent days, as evidenced by the following graph:
We plan on addressing the impact of fuel prices on auto finance during next week’s Auto Finance Risk Summit.
There has been some easing of oil prices in recent days, as evidenced by the following graph:
We plan on addressing the impact of fuel prices on auto finance during next week’s Auto Finance Risk Summit.
There has been some easing of oil prices in recent days, as evidenced by the following graph:
We plan on addressing the impact of fuel prices on auto finance during next week’s Auto Finance Risk Summit.
There has been some easing of oil prices in recent days, as evidenced by the following graph:
We plan on addressing the impact of fuel prices on auto finance during next week’s Auto Finance Risk Summit.
There has been some easing of oil prices in recent days, as evidenced by the following graph:
We plan on addressing the impact of fuel prices on auto finance during next week’s Auto Finance Risk Summit.
Marcie,
For lenders, rising gas prices will eventually affect overall recovery rates. For the larger lenders, a 1% decrease in recovery rates translates into millions of dollars less to the bottom line. An interesting thing about the gas price / vehicle value correlation is that there are vehicles that actually increase in price as gas prices go up. So a lot depends on the make-up of a lender’s portfolio.
When bankers re-learn that “putting the customer first” is also good for the lender, then the banks will be returning to their role in helping the economy. Amazingly, it is profitable for the banks in the long-run. The best consumer credit administrator that I ever knew (he was also the first to securitize auto paper because of his reputation) was very firm with car dealers on abusive practices and looked for the value to the community in all lending. When his bank (in the top 25 in the nation at that time) was acquired (it is now part of Chase) the auto dealers all went to the acquiring bank and told it that if they ever terminated him, they would get no paper from most of the dealers! That is leadership and RESPECT! How many readers can say that?
And his results would match the top performers all the time. It simply took hard work and leadership.