‘Growing Pains’ Not Cause for Concern, Praxis Exec Says

Praxis Finance has considered offering indirect auto financing, but due to high competition and low margins “there are better times to launch that,” Daniel Parry, chief executive of Praxis Finance, told Auto Finance News. However, the auto finance industry is on tap for a good year, despite “fear mongering” about the next crisis, he said.

“There has been a lot of media attention given to the performance of subprime auto — basically indicating that there’s an impending bubble — but that is largely overblown,” Parry said. “It’s not uncommon for lenders to run into short-term credit issues, particularly if they have gone through significant change with respect to management, operations, or growth.”

While organizational change can cause credit performance disruptions, “the thing to remember is that there are a lot of smart, experienced people running subprime auto finance companies and they will work through those issues,” he said. “While there are always some lenders who overreach to get volume, most blips in performance are the result of the normal growing pains lenders experience as they attempt to push the company to the next level. It all comes down to people, process, and technology.”

Securitizations are becoming more expensive, and auto lenders may pull back their volume a bit, “but that’s not necessarily a bad thing for the market,” Parry said. “Some lenders want to make sure they control credit, while others are managing to their available capital. The fear many have is that intense competition will drive companies to compete for volume at all costs, but seeing lenders moderate growth is a sign that the market is in fact rational.”

Grapevine, Texas-based Praxis Finance finalized a partnership with Värde Partners in January 2015, which provided Praxis with $100 million in capital to purchase auto finance receivables, the company previously told AFN. Praxis now purchases portfolios in 18 states.