Lending Curve - Part 25

2018 Shift in Auto Lending

Post author By efgmarketing
Post date February 14, 2018

Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

In 2017, we saw banks begin to pull back from auto financing, especially in the subprime markets. At the same time, captive lenders utilized manufacturer incentives to increase new vehicle loan volume, and credit unions increased their market share in both the new and used space by filling in the gaps that the banks left behind.

In 2018, we’re seeing a very similar pattern as banks continue to pull back and manufacturers continue to provide deep incentives to make new vehicles more affordable. The National Automobile Dealers Association predicts that 16.7 million new and 15.3 million used vehicles will be sold in 2018. While the new vehicle projection is slightly down from 2017, the used vehicle projection is actually higher than 2017 numbers.

In recent years consumers have been relying on leases and longer-term loans to afford vehicles with a price tag that keeps going up. This has resulted in large amounts of off-lease vehicles hitting markets in 2016, 2017, and in 2018. Meanwhile, the deep incentives provided by manufacturers are undermining vehicle values. The combination of the incentives and record off-lease vehicles hitting the market results in used vehicle values declining – hence the projected increase in used vehicle sales.

As more consumers look to purchase a potential surplus of pre-owned vehicles, auto lenders need to ask themselves how they can help dealers incentivize consumers to purchase with them. We all know dealers are more likely to send business your way if you act as a partner in accomplishing their goals.

Compliance

Consumer Privacy in Auto Lending

Post author By efgmarketing
Post date February 1, 2018

Contributing Author:
Brien Joyce
Vice President
EFG Companies

Do you know someone who was affected by the Equifax data breach? How about the Verifone hack or, the breach within the Internal Revenue Service (IRS)? According to the Identity Theft Resource Center® (ITRC) and CyberScout®, 1,579 data breaches occurred in 2017, representing a 44.7 percent year-over-year increase.

A study of more than 10,000 consumers by Gemalto, a data security firm, stated 70 percent of consumers would stop doing business with a company if it experienced a data breach. And, 69 percent feel businesses don’t take security of consumer data very seriously.

As a lender, you’ve probably paid very close attention to your policies and practices when it comes to securing consumer data, especially as you’ve migrated your business model to a mostly digital platform. However, your dealer partners have not felt the same pressure to ensure their data compliance. After all, it’s only been in recent years that auto dealers have begun to take fuller advantage of the digital resources available to store their documents and manage their customer relationships.

So, here’s my question for you. If a data breach occurs within a dealership and all the consumers they sent your way were affected, does that look bad on you? After all, the consumer thinks of you as their lender, not the dealership. While they may have filled out the loan application in a dealership, they most likely consider you the source of truth for their information. If a consumer has their identity stolen from their loan application and they place blame on you and the dealership, what are you to do?

Tags Brien Joyce, CyberScout, data breaches, data security, EFG Companies, Gemalto, Gramm Leach Bliley Act, Identity Theft Resource Center, LexAlign, Safeguards Rule, steve roennau, Trevor Lain

Business Growth Economy

Risk versus Reward in 2018

Post author By efgmarketing
Post date January 17, 2018

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.”