Increased powersports F&I product portfolio expected to double lease volume
EFG Companies, the innovator behind the award-winning Hyundai Assurance program, and MotoLease, LLC announced today an expanded partnership to offer unique customer leasing options through MotoLease authorized dealers. Since 2014, MotoLease has offered EFG’s private-labled Select Guard suite of F&I products. The company will now add EFG’s Guaranteed Asset Protection (GAP) to further protect customer investments and help dealers increase loyalty and profits.
Steve Roennau Vice President Compliance EFG Companies
Every lender that has undergone a Consumer Financial Protection Bureau (CFPB) investigation has been hit with extensive fines and a change in process. Even the most prepared and compliant lenders have found themselves reeling after an investigation. For example, after undergoing a stringent investigation by the CFPB and the Department of Justice, Toyota Motor Credit Corp (TMCC) reached a “voluntary” resolution to address alleged discriminatory practices in its loan pricing.
Of all of the lenders anticipating a CFPB investigation, TMCC was arguably the most prepared, having completed a very thorough overhaul of their compliance procedures based on CFPB industry recommendations. If anyone was going to come out the other end of a CFPB investigation unscathed, it might well have been them.
Nevertheless, it seems that the CFPB’s agenda to use lenders to regulate dealers was not appeased with anything less than sweeping caps on dealer reserve. TMCC joined the growing list of lenders to cap dealer markup at 125 basis points for loan terms up to 60 months, and 100 basis points for loan terms longer than 60 months. And, as with previous settlements with other lenders, TMCC retains the right to pay dealers a flat fee for setting up the loan in addition to the approved dealer markup.
The TMCC settlement is momentous to the industry because the CFPB appears to have settled on a way to regulate auto lending without implementing an industry-wide flat, but rather with capping dealer markup.
Contributing Author: Steve Roennau Vice President Compliance EFG Companies
The National Automobile Dealers Association predicts new unit vehicle sales to top out at 17.7 million in 2016, which equates to less than 1% increase from the 17.5 million units in 2015. Industry experts across the board are expecting auto sales to plateau because of rising interest rates, increased regulatory compliance costs, and wage and income pressure. But that’s not to say there isn’t money to be made.
17.7 million units is still vastly greater than the 10.4 million unit sales from 2009. If anything, it marks one of the strongest recoveries the retail auto industry has ever experienced. With that in mind, there is still plenty of opportunity to increase loan volume, especially in the subprime market.
That’s right, I said there is opportunity in the subprime market. Even with rate increases and flat wage growth, the opportunity to increase loan volume and better protect your loan portfolio is there for those willing to look for it.
With the Federal Reserve slowly raising interest rates, everyone is on alert to see if and how economic setbacks will affect the subprime market. After all, economic downturns tend to hit the subprime demographics first, with sustained impact.
Increased powersports F&I product portfolio expected to double lease volume