Why Penetration Rates Are Dropping at Hyundai Capital, NMAC

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LAS VEGAS — Hyundai Capital America expects rising interest rates to squeeze penetration ratios to 40% or 50% by yearend across all its franchise brands, Chief Executive Ross Williams said during a fireside chat at the Auto Finance Summit.

Historically, the captive’s penetration rate has hovered around 70%, Williams said. However, the rising interest rate environment is hamstringing captives by driving volume to credit unions that offer lower rates. As HCA waits out the Federal Reserve’s rate hikes, it looks to have a “well-balanced consumer portfolio” and plans to “do more certified pre-owned business,” Williams said.

“Diversifying the portfolio makes a lot of sense, especially if there’s an economic downturn,” he added, noting that he believes a slight downturn is inevitable.

Nissan Motor Acceptance Corp. has also experienced a dip in penetration rates this year, Vice President of Sales and Marketing Jim DeTrude said during a panel discussion at the summit.  

“We pulled penetration back this year, where instead of [penetration] in the 60% range, NMAC is in the mid50% range,” he said.

However, the lower penetration rate is a result of Nissan Motor Co. Chief Executive Hiroto Saikawa’s objective of “sustainable profitability,” DeTrude said, noting that the captive is evaluating pricing and dealer relationships.

DeTrude expects the captive’s penetration rates to rise in 2019.

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As Associate Editor of Auto Finance News, Nicole Casperson reports on the latest news, trends, and innovations impacting the auto finance space. Nicole is an experienced business reporter from Texas, and she previously specialized covering the housing and mortgage industry. Nicole received her Master of Arts in Mass Communication and her Bachelor of Arts in Journalism both from the College of Media & Communication, Texas Tech University.