Tag: Steve Klees

Categories
Economy

If Your Customers Can’t Pay, You Will!

 

Mark Rappaport President EFG Companies
Mark Rappaport
President
Simplicity Division
EFG Companies

According to a recent survey from Bankrate.com, 63 percent of Americans say they are unable to handle a $500 car repair bill; and, only one out of five consumers making less than $30,000 said they had enough emergency savings set aside to handle an unexpected bill.

In addition, a Pew Charitable Trusts study found that six out of every 10 American households reported experiencing a financial shock during the last year, with major car repairs and lost income ranking among the most common.

What does this tell us? That those rosy figures of economic growth don’t match the current financial stresses of Americans. The fact is, with inflation increasing the costs of food, healthcare, clothing, utilities, etc., and slow wage growth, many Americans are finding it more difficult to pay in to their “rainy day fund”.

Continue reading “If Your Customers Can’t Pay, You Will!”
Categories
Business Growth Economy

Don’t Let Interest Rates Dictate Your Loan Volume

Brien Joyce Vice President EFG Companies
Brien Joyce
Vice President
EFG Companies

In a widely anticipated decision, the Federal Reserve voted to raise interest rates this past December by 25 basis points.

And, of course, one of the first industries that will be affected by this rate hike is auto finance. As you re-assess your lending portfolio to take into account the new rates, it’s also the perfect time to evaluate how to differentiate your institution beyond rate alone.

With the interest rate hike, we can expect retail auto sales to begin to plateau in 2016. It wouldn’t be surprising to see little to no growth in overall unit sales next year. This trend will shape dealer business, as they will begin focusing more on customer retention and brand enhancement. This refocusing offers lenders the chance to differentiate their institution and grow loan volume through their engagement with dealers. The more business a given dealer has, the more opportunity you have to increase loan volume. Therefore, every lender should ask themselves, “How am I helping my dealer partners achieve their business goals?”

Continue reading “Don’t Let Interest Rates Dictate Your Loan Volume”
Categories
Economy

Bubble, no Bubble? It Doesn’t Matter!

Contributing Author: Steve Klees

 

Contributing Author: Steve Klees, Senior Vice President, Specialty Channels, EFG Companies

For the past several months we’ve heard arguments across the industry about whether a subprime bubble is forming. Experian has stated in at least the last three quarterly State of Auto Finance updates that there simply is no bubble.  I tend to agree. Here’s why:

For an economic bubble to form in the auto industry, the prices of vehicles must inflate well beyond the actual vehicle value, past what the market can bear. While prices for both new and used vehicles have gone up in recent years, the market is still very capable of handling those prices. The main reason for this is the combination of low interest rates and longer-term loans.

For example, take a subprime consumer who purchased a vehicle in 2009. Because of the stringent lending requirements at that time, that consumer locked in a 9% interest rate on a 60-month term loan. Then, in 2014, they decided to trade in their vehicle for a newer used-model vehicle. Because the consumer kept up with their monthly payments and possibly made other credit strides with better employment, etc., they returned to the dealership as a near-prime consumer, and were able to refinance the remaining balance into their new vehicle payment at a 3.9% interest rate. With a new 60-month term loan, their payments stay roughly the same. The consumer already proved they could afford those payments with the first vehicle, so the risk remains roughly the same.

Continue reading “Bubble, no Bubble? It Doesn’t Matter!”