Loan-Restructuring on the Rise as Competition for Deals Stiffens

With the economy in a downturn, lenders are softening their approach to turndowns.

“Everyone is trying to be more hands-on, with the economy the way it is,” said Danyel Cares, finance director at Jeff Haas Mazda. The Houston dealership sells 150 cars per month.

Vehicle sales are hard to come by these days — the seasonally adjusted annual rate plunged to a 16-year low in September — so some lenders are negotiating more with dealers in an effort to minimize flat-out declines. The move comes at a time when lenders across the board are toughening underwriting standards as they try to improve their portfolios’ credit profiles.

“Lenders are finding ways to try and buy the deal,” said Mark Tyza, finance manager at Ferndale Mazda, in Michigan. “If it’s a shaky transaction, they may offer a shorter term, more money down, or a less expensive vehicle, as opposed to dropping it altogether.”

Previously, underwriting decisions were “black and white,” he said. Lenders “were not the ones to suggest ideas; now they are,” he added.

All of Ferndale’s lenders — which include Chase Auto Finance, Fifth Third Bank, and Mazda American Credit — are rehashing deals more, Tyza said. The dealership sells about 30 cars per month.

According to Michael Appling, finance manager at Mazda of Clear Lake, restructuring can also take the form of a lower loan-to-value ratio. “Every situation is different,” he said. “It’s based on the customer. An older vehicle with a shorter term will score better with the bank.”

The Texas dealership funds loans with AmeriCredit Corp., Chase Auto, Compass Bank, and San Antonio Federal Credit Union, among others.

These days, “probably 50% of deals are rehashed,” Appling said, up from a previous 25%.

Nick Borrelli, finance manager at California dealership Alhambra Mazda, is used to spending 20 or 30 minutes restructuring deals with Mazda American Credit.

—Marcie Belles