BLOG FOR SPECIAL FINANCE CAR DEALERS
A New Era in Subprime Auto Lending
A few days ago Americredit announced securitization of $600 million dollars. Last quarter Consumer Portfolio Services announced a securitization as well. In addition, we have seen an increase in lending offered by smaller regional firms across the country.
Does this mean subprime lending is back? Not yet. Before the meltdown last year it was quite common for a special finance car dealer to have near twenty special finance lenders in their portfolio. With such a competitive environment, lenders offered longer terms, lower rates, and lower fees.
As evidence, for the period ending December 31, 2008 our stats showed that the average special finance car loan, based on 17,500 deals, was $15,473, with an average term of 63 months, average rate of 18.5%, and average fee of $460.
We have not finished compiling data for 2009 yet, however, any car dealership that participated in subprime last year would agree that the average loan amount is now near $12,000, the average term below 60 months, the average rate in the 20’s, and the average fee is near $1,000.
During 2009 we also saw many subprime lenders go out of business and other lenders cut expenses. Most that remain terminated their field force of sales reps and terminated agreements with under performing dealers. So what do I expect to see in this new era of special finance lending?
- To keep expenses low, lenders will focus on a smaller group of aggressive special finance dealers.
- Car dealership look to book ratios will be more important in 2010 than they have ever been.
- Lender approvals will remain conservative, as such acquiring ideal special finance inventory in the $3,000 to $10,000 ACV range will continue to be problematic for car dealers.
- Car dealerships that choose to roll up their sleeves and participate in the subprime arena will win big!
August 18th, 2010 at 10:26 pm
subprime lending will be the death of poverty.