What a year it has been, from heightened uncertainty surrounding the SAAR for 2010 to the blockbuster GM IPO and a return to a market healthy that at least this author didn’t predict.
If 2011 will be anything like 2010, there’s much change in store for the auto finance industry. Let’s use this space to hash out what can be expected for auto finance in the coming year. Specifically, and to frame the discussion, here are some topics that deserve our attention:
Unemployment. The unemployment rate is the driver of credit performance for the industry. What are your expectations for unemployment in 2011 and why?
Housing. The faltering economy over the last few years has been squarely blamed on a faltering housing market. What kind of turnaround can we expect in 2011?
Interest Rates. This is perhaps the most uncertain factor out there, what with QE2 in full swing and inflation seemingly on the horizon. In recent months, you couldn’t look at the long bond and not grimace. In 2011?
Gas Prices. Gas prices are attached to the SAAR’s hip, and despite the rash of energy-efficient cars being unveiled, high gas prices would still dampen car sales in 2011. What are your expectations for fuel prices next year?
Underwriting Standards. All the factors we’ve already mention get folded into underwriting standards, and while underwriting has largely held the line in 2010, all bets (in my opinion) are off for 2011. What’s your view on underwriting in the coming year?
Comment on some or all of the indicators we’ve highlighted above. And most importantly, enjoy the holiday season.
Answer to your last question: yes.
I talked to many F&I people at the dealership the last couple of weeks and to a person their attitude is “Hey I’m not worried about how I structure a deal as long as the bank accepts it. Why should I care? That’s the lender’s problem!
What they don’t see is the fact that Banks have to start caring January 1st 2011 so they better start caring. Mark my words lenders care deeply about deal structure and lender control is going to be a major factor within a few months as the details of the Consumer Protection Law are more fully revealed. Over the next year or two everything will do a 180.
I believe all hidden dealer Participating and/or Processing Fees will be a thing of the past unless fully revealed to the buyer. In fact you will see full disclosure of deal structures and total comparison of all the lenders Interest Rates to the customer just like their doing in California and a couple other states.
2011 is going to be the start of an interesting year in the finance market.
Bill Fowler