Mobility to Change Secondary Market, Goldman Economist Says

  • William Hoffman
  • November 7, 2017

Robert McDonald, vice president of structured finance in the investment banking division of Goldman Sachs, gives a presentation at the 2017 Auto Finance Summit. (Photo by William Hoffman)

LAS VEGAS — Goldman Sachs & Co. is mulling how to structure new ownership and investment models as lenders eye a mobility-focused future in which financial institutions are lending more for fleets of vehicles rather than for individual service contracts.

“You’ll see more transition to institutions becoming fleet managers,” Robert McDonald, vice president of structured finance in the investment banking division of Goldman Sachs, said at the 2017 Auto Finance Summit. “I think we’ll spend more time financing fleets of vehicles, more so than auto loans.”

Lenders will likely start by structuring fairly traditional securitization deals for these new ownership models, but eventually issuances will be structured based on the revenue a car generates, rather than on the value of the underlying asset, McDonald said.

“You can see a model where you try and lend against the asset value, but the residual value for autonomous vehicles is going to be tough to understand and calculate,” McDonald said. “You can see it morph into lending against cash flow — less so the asset.”

There are a number of startups exploring the idea of monthly subscription models, including Carma Car, Clutch, and Fair. OEMs are interested, as well, with Ford Motor Co.’s acquisition of Canvas, General Motors Co.’s Book by Cadillac, Porsche Passport, Volkswagen Group’s Audi on Demand, and Care by Volvo.

“You’ll see how much revenue is being generated off those vehicles,” McDonald said. “As you move more into autonomous vehicles, you’ll move into relatively predictable cash flows, at that point compared to the actual value of the underlying asset.”

For more coverage from the 2017 Auto Finance Summitclick here.

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