Tag: steve roennau

Categories
Business Growth

The Great Debate: To Take Action or To Wait

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

Subprime Analytics recently reported the largest reduction in subprime auto finance down payments since 2011. Subprime auto finance down payments experienced a 15% year-over-year decrease in 2015. While down payments are down, the amount financed is up. According to Experian, the average used vehicle loan amount for franchise and independent dealers increased to $18,424 in Q1 of this year.

With the combination of these two trends, it’s no wonder that average subprime loan terms have increased by 4.5% year-over-year since 2012, according to Subprime Analytics. Now lenders are looking to extend loan terms to 84 months.

What do these trends mean for the long-term? For the last year, industry analysts have been telling everyone to wait and see. But, when does waiting and seeing turn into putting our heads in the sand?

Rather than waiting for the market to turn, and reacting to the circumstances that arise, smart lenders are taking proactive steps now to protect their lending portfolios from potential market changes.

Now, you might think, “I don’t want to be the first lender to start tightening lending requirements and lose loan volume and market share.” The good news is you don’t have to jump the gun. Rather, take a step back and look outside the box for solutions that can protect your portfolio and increase loan volume.

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Categories
Business Growth Economy

Flat Auto Sales Doesn’t Have to Mean Flat Loan Volume

Steve Roennau Vice President Compliance EFG Companies
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.

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Categories
Compliance F&I

Prepared for F&I Product Compliance?

Steve Roennau Blog Headshot

With the Consumer Financial Protection Bureau (CFPB) quickly ramping up its influence over auto-finance, it is widely expected that F&I products will be the next area of scrutiny. As a lender, there are a few ways to proactively prepare your institution for this next step in CFPB regulation.

The first, and most obvious step is to set limits on how much you’ll fund for the sale of F&I products. Be aware, however, that as the CFPB is reducing the dealer profit from rate markup, dealers will be looking to maximize profit from F&I product sales. They will be looking for lenders who are competitive with their funding options. Look at your entire compensation plan to ensure that it not only promotes consistent pricing, but also fairly and competitively compensates the dealer for the business.

As with all of the vendors that a lender uses, the CFPB is likely to require lenders to vet all product administrators. Savvy lenders are reviewing the contracts to get a better view into the product administrator’s practices, and their customer service standards.

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