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

Article

Auto Finance Keys Q1 Sales Uptick

July 2012, F&I and Showroom - Feature

by Melinda Zabritski

Based on first-quarter data, the auto finance marketplace is the healthiest it has been since the market bottomed out in 2008. Credit scores dropped to near pre-recession levels and the total dollar volume of at-risk loans fell to a six-year low.

Data from the opening quarter of 2012 also shows that more people are financing their vehicle purchases, with all lending segments realizing increases in loan balances. And as has been the case in recent quarters, drops in delinquencies and at-risk loan amounts fueled a more welcoming auto finance market.

Consumers who purchased a vehicle in the first quarter were able to finance more expensive vehicles at lower interest rates and longer terms. The drop in credit scores also meant more car buyers with damaged credit were able to obtain financing, which will be key as the industry continues to chase those 16 and 17 million-unit years.

Vehicle Loan Rate: How have rates changed?
Vehicle Loan Rate: How have rates changed?

Loan Balances on the Rise

Dealers and automakers weren’t the only ones welcoming the 13 percent rise in auto sales during the first quarter. Auto finance sources, which have seen loan balances fall during those lean recessionary years, realized a $26.8 billion increase in outstanding loan balances. Nearly half of that growth was driven by banks, with outstanding balances growing by approximately $13 billion. Captives realized a $7 billion increase, while finance companies and credit unions saw loan balances increase by $4 billion and $2 billion, respectively.

Consumers Driving Lender Confidence

One of the most important measures of the industry’s health is the rate at which consumers are paying back their loans. As in prior quarters, loan portfolios continue to demonstrate a significant improvement in repayment patterns and in the percentage of dollars at risk.

On-time payments drove down the 60-day delinquency rate from 0.65 percent in the year-ago period to 0.57 percent in the first quarter, while the 30-day delinquency rate fell from 2.52 to 2.33 percent. The drops helped push the percentage of total dollars at risk to its lowest level since Experian Automotive began publishing delinquencies in first quarter 2006.

In the opening quarter, 30-day delinquencies totaled $12.1 billion, or 1.8 percent of the total loan portfolio, while 60-day delinquencies totaled $2.6 billion, or 0.4 percent of all loans.

Risk Distribution of New Loans: How has financing on vehicles changed?
Risk Distribution of New Loans: How has financing on vehicles changed?

Lower Rates, Longer Terms

Finance sources rewarded consumers for their improved repayment pattern with more favorable terms and interest rates. They also provided car buyers with access to more expensive cars at lower monthly payments.

Interest rates for new-vehicle loans came in at 4.56 percent in the first quarter, down from 4.83 percent in the year-ago period. For used-vehicle loans, interest rates fell from 9.08 percent in the year-ago quarter to 9.02 percent in the first quarter.

Loan terms for new-vehicle loans increased by a month from a year ago to 64 months, while terms on used-vehicle loans inched up from 58 months to 59 months.

Consumers responded by taking out slightly larger loans during the quarter, with the average amount financed on new vehicles rising by $589 to $25,995. For used vehicles, the average amount financed increased by $411, bringing the average total to $17,050.

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
Selling to Short-Term Owners

By Ronald J. Reahard
The magazine’s F&I pro responds to a question about how to build value in F&I protections if the customer says he plans on paying off his loan long before the term expires.

(Video) Selling High-Mileage VSC Plans

By Ronald J. Reahard
How do you sell a $3,000 VSC on an $8,000 car? Top trainer offers a four-step process to ensure every customer gets the protection they need.

Selling Warranty Compliance Plans

By Ronald J. Reahard

Handling the ‘Last Car’ Objection

By Ronald J. Reahard

Done Deal

Gregory Arroyo
Resolution Needed

By Gregory Arroyo
The editor shares some insider information regarding the industry’s efforts to get the Defense Department to reconsider last month’s interpretive rule regarding the sale of GAP and credit insurance to military consumers.

Rescinding the CFPB’s Auto Finance Guidance

By Gregory Arroyo
The editor debunks a few myths about the Consumer Financial Protection Bureau, then explains why the industry is on the brink of repealing the bureau’s auto finance guidance.

Still a Work in Progress

By Gregory Arroyo

It Is Unwise to Lower Your Defenses

By Gregory Arroyo

Mad Marv

Marv Eleazer
Chargeback Prevention

By Marv Eleazer
How do you respond to a customer who wants to cancel the F&I program you sold them? His Madness digs into four common reasons consumers give for wanting out of a protection plan.

Your F&I Backup Plan

By Marv Eleazer
Equipment failures can’t stop an F&I manager who is prepared for any contingency. His Madness lists four backup plans you can implement today.

Love It or Leave It

By Marv Eleazer

G.O.Y.A.

By Marv Eleazer

On the Point

Jim Ziegler
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
Da Man says $40,000-a-month sales rock stars still exist. He says you’ll find them on YouTube and Facebook Live.

The New Stooges

By Jim Ziegler

Is Your Quick Lube Driving Away Business?

By Jim Ziegler