Auto Credit Express Blog
April 28, 2008
The state of the subprime market 1st quarter 2008
With a number of subprime lenders reporting first quarter results, a clearer lender picture is emerging for the second quarter of 2008.
What we know
Most economic indicators point to a slowing economy at least through the third quarter of 2008. While the subprime credit crunch in the housing industry is much more severe than that experienced in the automotive sector, the inability of many people to make their house payments has spilled over into both the prime and subprime auto sectors.
While subprime auto lenders are still able to securitize their loan portfolios, it has become a longer and more expensive process than in the past. Because of this, lenders have reduced their loan production. As an example, both AmeriCredit and CPS plan to reduce the total dollar amount of contracts that they will be buying by almost 50%. HSBC has stopped doing indirect lending in Michigan and 8 Northeast states and has drastically cut back on the amount of business they are doing in the remaining 39 states.
Even the lenders that continue to do business are tightening up on PTI as well as LTV. Changes in both these parameters mean you may have to adjust your inventories to reflect the average incomes of your customers as well as how far in back of book you need to buy your vehicles.
What you can do as a special finance manager
Here at Auto Credit Express, we’ve said it in the past and it still holds true – now more than ever it is vital that you establish and maintain a good relationship with your lenders. In that way, if they begin to change their buying patterns, you can openly discuss these changes with the lenders and change your internal methods accordingly. The more you familiarize yourself with a lenders buying parameters, the better chance you have of avoiding high look to book ratios that would cause a lender to terminate you.
What LotProOnline can do for you
A good subprime desking tool can help you streamline your subprime department and so much more. In addition to helping structure deals, LotProOnline can eliminate keystrokes by allowing you to push customers or even entire deal structures directly to lenders through DealerTrack or Route One. It will also give you a snapshot of your inventory and let you know how all your vehicles book versus NADA and Kelley. It can prioritize deals according to gross profit, but it will also compare lenders so that you are able to make a decision based not on profit alone, but on your relationship with the lender.
For more information on LotProOnline, visit our website to fill out a quick contact form, or call one of our knowledgeable software specialists at 888-535-2277.
