In the past two years, lenders have focused on both retail customers and dealer clients to stem losses and improve operations. Specifically, lenders have tightened underwriting guidelines — raising credit-score minimums, lowering loan-to-value ratios, and shortening loan terms. On the dealer side, financiers are keeping tighter tabs on titling efforts and more closely monitoring dealer stats.
From what I can glean so far, it seems like the consumer-facing changes are working. Delinquencies and losses are coming down, and loan quality is noticeably improved. If lenders stick to these new guidelines, they’ll be booking loans with performance trends better than they’ve seen in years.
What I worry about, though, are the dealer-related efforts. Certainly, they’re a start. But from news I’ve seen lately about more dealerships shutting their doors and increased scrutiny by state attorneys general, lenders had better not let down their guard. In fact, when it comes to dealer scrutiny, lenders might need to redouble their efforts.
I am at a loss for words. Are you saying that the $1.54 billion net loss includes some HUGE amount of operating overhead (primarily staff salaries) for the anticiapated SAAR increase?
Surely, they are not saying that income from subvention activities is accrued at an accelerated rate when received and is used to offset repo losses, floorplan losses, and foreclosed dealer capital loans.
Could you illucidate me on the details of how that drop in volume caused such large losses if not in my 2 examples. I would appreciate the education.
While the dealers are hurting, they must look in the mirror to see elements that contributed to the problems. And shame on the financial intermediaries that contributed to the problem; here are just two:
1) Extended term financing to assure that the borrower is upside down for longer periods of time.
2) Allowing dealers to add as much to the contract buy rate as they can get away with while assuring that borrowers will “pay the supid tax” to get the car of their dreams.
I will stop with just these two as the list is quite long as auto finance credit administrators already know. Yet they allowed it to happen because they were not capapble of explaining the consequences of excess financing to dealer owners. Maybe the dealers will listen now if they survive.