Tag: Mark Rappaport

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Business Growth Economy

Diminishing the Drumbeat of Lost Auto Loan Volume

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

You’re sitting in a dark movie theater, watching a suspenseful film. Tensions build as an ominous drumbeat signals danger. Is the danger real or a figment of your imagination?

The credit union industry might be hearing a drumbeat, but is it real?

After steadily gaining auto finance share over the past eight years, credit unions lost market share in the first quarter, according to Experian’s latest State of the Automotive Finance Market Report. Market share for credit unions dipped 1.4 percentage points to 19.9%, down from 21.3% in the first quarter of 2018.

The drop was largely driven by declines in used-car financing, where market share fell to 26% from 28% in first-quarter 2018. Even in new-vehicle financing, credit unions’ share dipped to 12.4% from 13.5% the previous year.

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Categories
Economy

Protecting Your Loan Portfolio from Auto Defaults

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

According to recent data from the S&P Dow Jones Indices and Experian, auto defaults rose by 9 basis points in August, and by 10 basis points in September, 2017. These represent the largest month-over-month increases since December 2011. In addition, September’s auto defaults represent the highest level analysts have seen since February 2015.

With these numbers in hand, it’s no surprise that more banks are pulling out of the subprime auto finance space to retool their credit algorithms. As credit unions and captives scramble to capture that market share, lenders everywhere are evaluating how to securely expand their auto loan portfolios without significantly increasing risk.

We’re seeing more lenders looking into alternative data to expand their algorithms and better qualify consumers. Among other criteria, lenders are increasing the importance of income verification, employment tenure, pay frequency and the possibility of employment disruption in their qualification process.

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Categories
Business Growth Economy

Perspective on the Auto Sales Plateau

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

It’s official. Auto sales have plateaued. Dealerships across the U.S. are reporting low sales numbers in comparison to last year. Manufacturers have increased incentives, but no one’s taking the bait. Looking at these headlines, it all looks like doom and gloom. But, let’s take a step back for a second.

According to Automotive News, the auto industry sold 17.5 million vehicles last year, representing a seventh straight year of growth. When put in that perspective, a plateau at 17.5 million vehicles doesn’t seem too bad.

Yes, vehicle sales aren’t hitting manufacturer projections, but seriously, how long did they really think sustained growth was going to continue? We’ve been in one of the longest economic expansions in U.S. history; the economy was bound to slow down at one point.

With that perspective in mind, economic indicators continue to be strong.  National unemployment has hit its lowest level since May 2007. We’ve seen strong jobs gains in recent months. According to CNN, wages rose 2.5 percent in the past 12 months, and the median price of a home has risen to $236,400. Lastly, consumers are still taking on debt. According to the Federal Reserve, consumer credit rose 4.8% annually in February.

Clearly, there is still plenty of business available. This time of relative calm, with no abrupt economic changes, is the perfect time for auto lenders to catch a breath, regroup and re-address their go-forward plans with regards to loan volume.

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