Tag: EFG

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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
Economy

Subprime Storm Clouds on the Horizon

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

The automotive finance industry has been riding a five year high with an average 8.30 percent year-over-year increase in unit sales from 2011 to 2015, according to data from Wards Auto. With the rapid pace of automotive industry growth lending requirements loosened, longer term loans became the norm and subprime lending skyrocketed.

With key market indications shifting, everyone is watching the market carefully, poised to tighten lending requirements. According to Experian, average new vehicle loan terms increased to 67 months in 2015, while used vehicle loan terms increased to 63 months. This has resulted in a significant growth of negative equity on car notes.

According to the NADA Used Car Guide (NADA UCG), the percent of originations, including trades that carried negative equity, increased year-over-year by 2 percent. In addition, NADA UCG also stated that based on data from J.D. Power’s PIN Network, of the cars that had an equity position in 2015 and 2016, the trade-in value decreased by 50 percent. In Q1 of 2015, the average trade-in value for a car was $1,000. By Q1 of 2016, the average trade-in value had decreased to $500.

Continue reading “Subprime Storm Clouds on the Horizon”
Categories
Business Growth F&I

Don’t Let Delinquency Keep You Down

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

Currently, the headlines are offering a lot of doom and gloom for the subprime auto finance market with regards to rising auto loan delinquency rates and the sheer amount of subprime paper.

According to the February Equifax National Consumer Credit Trends Report, 21.7 percent of all auto loans originated between January and November, 2015 were issued to consumers considered to be in the subprime market.

This marks the fourth year where the subprime segment accounted for between 21 and 22 percent of all auto loans.

In addition, Fitch Ratings reported that in February, 60-day delinquencies experienced a 12 percent year-over-year increase, bringing the delinquency rate to 5.16 percent. This is the highest delinquency rate since October, 1996. To put this into perspective, delinquencies peaked at 5.04 percent during the 2008 financial crisis.

Continue reading “Don’t Let Delinquency Keep You Down”