Category: Business Growth

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Business Growth Economy

Risk versus Reward in 2018

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

While the hastily signed Congressional Tax Reform Bill had many phoning their accountants at the end of 2017, the real questions are quickly emerging in 2018 as tax season looms. A strong stock market close in 2017 has been tempered with a predicted return of inflation, thanks to the Federal Reserve signaling interest rate hikes. How will lenders weigh the risk versus reward for the automotive credit market in 2018?

No doubt there are some bright spots on the horizon for the automotive market. Talk has abounded at this week’s Detroit Auto Show around advanced technology and improved models. Consumers signaled in December that demand is still high for the right type of vehicle – i.e., light trucks and SUVs. However, OEM incentives also reached record highs in 2017. And, while the volume of lease returns spiked, used car inventory continued to tighten in certain parts of the country struck by natural disasters.

Many economists and investment firms are remaining cautious for the beginning of 2018.  Credit Suisse Group AG issued an interesting comment, stating, “After a year of strong investment returns on risk assets, we enter 2018, a year likely to see sustained economic growth and good, albeit more limited returns. We believe the next generation, or Millennials, will emerge even more strongly as a major driving force in key realms of life.”

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Categories
Business Growth

What’s Your Value Proposition for 2018?

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

When you walk into a dealership, what value do you bring to the F&I office besides another loan for which their customers may qualify? In 2018, F&I managers across the country are concerned with three hot buttons:

  • Maintaining compliance
  • Maximizing profitability
  • Shortening transaction time

With a myriad of compliance procedures and paperwork on hand, F&I managers have a difficult job when it comes to balancing compliance, profitability and time management. The best way to separate your loan from the competition is to help them with this balance. How do you do this?

Provide clear standards for loan approvals. This not only helps with compliance, but helps F&I managers ensure that they submit well-qualified customers for your loans. You know your qualifications, but how well do F&I managers know them? Look at how often you deny auto loans. If that number is high, it could be because your standards are unclear to the F&I officer.

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Categories
Business Growth Compliance

Finding the Perfect Balance

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

From the very first time one person loaned another person their hard-earned money or goods, there has been a level of risk on whether they would ever see their money or property again. As the lender, finding that balance between risk and reward created the concepts of payment plans, requiring borrowers to pay back more than the total amount they originally received, as well as sophisticated algorithms for lenders to use to determine how lenient or restrictive to make their lending policies.

We are currently in a highly contemplative and speculative time when it comes to determining that perfect balance in auto finance. After seven consecutive years of vehicles sales gains, the National Automobile Dealers Association (NADA) is forecasting that vehicle sales will total out at 17.1 million new vehicles in 2017, slightly lower than total sales in 2016. This plateau could extend into 2018, or we could potentially even see the beginnings of a period of decline, or even a period of growth and expansion. It could go either way.

Lending practices differ greatly depending on whether an economy is expanding, plateauing, or declining. Hence, the period of reflection. Of course, a plateau at 17.1 million vehicles means that the consumer appetite for auto finance is still strong.

According to Experian’s latest State of Auto Finance Market Report, the total automotive open loan balance reached another record high in the second quarter of 2017, topping $1.1 billion. Average loan amounts remained high across all credit tiers, as well as across both new and used vehicles.

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