FORT WORTH, Texas — Longer-term loans “can serve a valuable spot” in the industry, said Tony Hejna, retail credit officer at SunTrust Bank.
“I see all of our consumer loan portfolios, and I take great comfort out of the fact that [auto loans] are still at the higher end of the payment hierarchy — which is an important thing as we think about extending terms,” Hejna told Auto Finance News in an exclusive interview at last month’s Auto Finance Risk & Compliance Summit. “Some of the new entrants in the fintech space are extending in an unsecured manner, which in my mind is much more risky.”
Additionally, 84-month loans are similar to interest-only mortgages, Hejna said. If a consumer needs an interest-only mortgage to get into a house, most lenders will not want to give the consumer that loan. The same goes for auto loans, he said. “If you really need an extended term to qualify for a payment — as opposed to cash flow — that’s probably a customer that shouldn’t be in an 84-month loan.”
With that in mind, longer-term loans “are a great alternative to leasing for customers who want the option to build equity in a vehicle, and I think that’s a key thing we are providing to the customers,” Hejna added.
Check out Hejna’s comments on 84-month loans in the video below.