The Industry's Leading Source For F&I, Sales And Technology

Article

A Driving Force

With strong sales driven by low interest rates and on-time payments, 2011 finished with a bang.

April 2012, F&I and Showroom - Feature

by Melinda Zabritski



By all accounts, 2011 was the best year for auto retailing since 2008. A strong showing in November and December pushed annual sales to about 12.8 million units for the year. Driving consumers off the sidelines were interest rates, which, coincidentally, reached their lowest average in three years.

The sales surge didn’t stop economists from debating the strength of the recovery, but for dealers, the fourth quarter of 2011 represented one of the best times for consumers to buy a new or used car or truck in recent memory — and consumers responded.

Finance sources did their part, too. Consumers from across the credit spectrum found it easier to get an approval for an auto loan. Credit scores for both new and used vehicles dropped, while the percentage of loans made to customers with below-prime credit topped the year-ago period. Sources were even willing to make payments more affordable for consumers by extending terms out to six or seven years.

Dealers can thank consumers for the easing guidelines. Buyers continued to make loan payment on time, driving down delinquency rates and the total dollar volume of at-risk loans. In fact, the total balance of 30- and 60-day delinquent loans fell by $1.3 billion and $562 million, respectively, during the quarter, while repossession rates fell by 5.8 percent.

Finance sources are clearly on more solid ground than they were two or three years ago, which bodes well for consumers and dealers. The following is a more detailed look at what happened in four quarter of 2011.

Low Rates Drive Interest

Consumers who came off the sidelines during the quarter were rewarded, with the average interest rate for new-vehicle loans dropping 32 basis points to 4.42 percent. For used, the rate edged down 3 basis points to 8.68 percent.  

The drop in interest rates for new-vehicle loans translated into a savings of $231 for the average 60-month loan totaling $26,418. For used vehicles, the savings were much smaller, about $15 over the life of a 60-month loan.

Buyers also benefited from lower monthly payments. Sources continued to stretch out terms as the quarter wore on, and loans between 73 and 84 months accounted for 14.1 percent of all new-vehicle loans, a 47.1 percent increase from the fourth quarter 2010. For used vehicles, loans with terms between 73 and 84 months accounted for 9.04 percent of all originations, up 41.1 percent from the year-ago period.

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

So Here's the Deal

Ronald J. Reahard
Help! My Dealership Is Packing Payments

By Ronald J. Reahard
Top trainer comes to the rescue of an F&I manager who fears an antiquated, discredited, and deceptive sales tactic has taken root at his store.

Sharing the Profit

By Ronald J. Reahard
After losing members of his sales team, a dealer asks the magazine’s resident F&I expert for his take on paying salespeople on F&I income.

Menus Don’t Work Miracles

By Ronald J. Reahard

Avoiding the AAA Objection

By Ronald J. Reahard

Done Deal

Gregory Arroyo
Red Flags Alert

By Gregory Arroyo
The editor believes recent regulatory activity should serve as a warning to dealers who haven’t dusted off their Red Flags compliance programs in the years since the rule took effect.

GAP Suffers Another Setback

By Gregory Arroyo
The editor reveals the truth behind an NPR report critical of the industry’s efforts to undo the Military Lending Act guidance that put the brakes on GAP sales.

Car Buyers Need F&I

By Gregory Arroyo

Protecting F&I’s Future

By Gregory Arroyo

Mad Marv

Marv Eleazer
Readers Are Leaders

By Marv Eleazer
Do you know the minimum amount of tread depth a tire must have for a tire-and-wheel claim to be approved? If you don’t, His Madness has a message for you.

Comply Like Nobody’s Watching

By Marv Eleazer
His Madness wants F&I pros to commit to ethical dealings with customers and finance sources because it’s the right thing to do, not just for the very real threat of reprisal.

'We Never Buy This Stuff'

By Marv Eleazer

Stop Painting Dealers With a Broad Brush

By Marv Eleazer

On the Point

Jim Ziegler
Bound to Fail

By Jim Ziegler
Da Man returns with a message to vehicle manufacturers jumping into the subscription waters: It ain’t gonna happen.

Sharpen Your Survival Skills

By Jim Ziegler
‘Da Man’ has a plan you can use to survive the collapse of the car business and remain profitable through the dealer apocalypse.

Sales Rock Stars Still Exist

By Jim Ziegler

The New Stooges

By Jim Ziegler