LAS VEGAS ― From regulatory change to growth and pent-up demand, executives here at the American Financial Services Association Conference spoke openly about the biggest challenges facing the industry. And although optimism rang throughout the CEO panel session, execs agreed the industry is not quite out of the downturn.
Employment is getting better, and the SAAR is expanding ― two good indicators of a solid recovery ― but “we’ve got a lot of work to do,” said Thomas Gilman, president and CEO of TD Auto Finance.
“Consumer confidence is still too low, and that correlates perfectly with automotive sales,” he said. “We’re not completely out of the woods yet.”
Uncertainty related to the regulatory changes on the horizon has auto financiers worried. John Hyatt, president of Bank of America Dealer Finance Services, noted that regulatory change will ultimately benefit companies and consumers, but preparation and making sure business is in order may be difficult.
“It will make us a better industry, but it will be a rough couple of years getting it right,” he said.
Loan terms were also a focus during the hourlong session Friday, where Hyatt predicted that the industry will begin to cap out at 72-month loan terms and resist going to 84-month terms.
“When looking at a deal that’s 84 months,we all need to make sure if it’s a good deal for the consumer,” said Marc Sheinbaum, president and CEO of Chase Auto Finance. “Yes, the dealer is our customer, but the consumer is our customer, too. That has to be on the radar screen when looking at a deal like that.”
With the average age of a vehicle currently at 10.8 years, it’s become apparent that pent-up demand is strong, which can mean good news all around.
“When the demand gets released, it’s going to be great for this business,” Gilman said, adding that it will require $260 billion in additional automotive financing in order to meet that demand. “We’ll all get swept up in that expansion,” he said. “[It will mean] tremendous opportunity for everyone.”
As most companies are looking for growth, competition in the marketplace can be positive, Sheinbaum said, adding that auto loans performed very well during the downturn. “Captives, banks ― we are open for business, we just have to be careful not to get ahead of ourselves in terms of some underwriting practices,” he said. If everyone sticks to their business practices, “there is opportunity for a lot of growth,” he added.
