| | | WEEKLY REPORT | May 23, 2012 |
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F&I BY THE NUMBERS
Consumer Portfolio rides subprime wave
First-quarter originations more than doubled for Consumer Portfolio Services, an independent subprime auto lender that operates in 45 states. The Irvine, Calif.-based finance company also turned around a year-ago loss. ($ thousands) | | | | | | | Q1 2012 | Q1 2011 | Change | | Originations | $119,903 | $50,036 | 140% | | Revenues | $44,518 | $32,395 | 37% | | Net income (or loss) | $512 | -$4,206 | n.a. | | | | | | | Source: Consumer Portfolio Services |
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JIM HENRY
Subprime tarnish fades, finally
| |  | Jim Henry is a special correspondent for Automotive News | |
Dealers have complained for a couple of years now about how long it's taking for subprime auto lending to bounce back.
Sure, the U.S. economy isn't growing as fast as we'd all like. But really, what's taking so long?
How about tarnish by association?
Part of the problem is that ever since the subprime-mortgage collapse, some investors can't bring themselves to buy anything with the word "subprime" in it, said John Di Paolo, principal of structured finance research at Prudential Investments. Di Paolo spoke last week at a conference sponsored by Standard & Poor's Ratings Services.
"Some investors, I don't think, will ever come back to subprime," he said. That's despite the fact that subprime auto loans performed pretty well through the recession and performed a much better than mortgages.
"People don't differentiate," he said.
While some investors have been turned off forever, the good news for dealerships is that many investors are now pouring money into subprime lenders, which the lenders are using to make new loans and grow again. Subprime accounted for 41.5 percent of U.S. loan and lease originations in the fourth quarter last year, up from 38.4 percent the year before, Experian Automotive says.
All indications are that the first quarter this year followed the same pattern, with an increase in subprime share.
Finally, subprime loans are starting to catch up.
JAMIE LaREAU
Prime customers are in the mood to shop again
| |  | Jamie LaReau covers auto dealers for Automotive News | |
Seeing customers with lousy credit apply for auto loans is nothing new.
But when more folks with prime credit scores return to the auto market and seek loans with vigor, that's something to talk about.
According to Morgan Stanley analyst Adam Jonas, the Morgan Stanley U.S. Credit Quality index rose more than 7 percent year-over-year in March. That amounts to 27 consecutive months of increases and puts it at the highest level on record.
The rise in the index was driven by a "broad base reduction in credit losses and delinquencies on auto loans, especially for subprime auto loans," Jonas says.
Credit quality measures how well loans are performing. For example, if people are paying on time or not or if there are a lot of expensive repossessions.
A continued rise in the credit quality index is an indicator that more customers with prime credit ratings are getting back in the game, some dealers say.
Mac Haik Dodge-Chrysler-Jeep-Ram in Houston has seen the trend firsthand. New-car financing there is up 25 percent through April compared with a year ago. The bulk of that increase is in prime loans, says Nancy Lambert, general manager.
"There's always going to be people with bad credit trying to get a car loan, but the regular people are coming back now," she says. "They were holding back before, watching to see what the economy was going to do."
Prof teaches shocking truth about F&I regs
 There's a shocking amount of paperwork that must be filled out exactly right for each finance and insurance transaction. Northwood University is helping aspiring auto dealers and managers deal with the assault head-on. Students come in "thinking it's so simple," says Julie Becker-Myers, 34, director of automotive systems technology at the Northwood campus in Midland, Mich. ...  story
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F&I PRESS RELEASES
» Auto Affordability Down Slightly In First Quarter, Comerica Bank Reports
» Mercedes-Benz Financial Services maintains position as an innovator in mobile technology
» TransUnion: National Auto Loan Delinquencies Hit Lowest Level on Record
» LAW California F&I Library Launched by Reynolds and Reynolds and California New Car Dealers Association
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F&I BY THE NUMBERS
Leasing makes small gain
Leasing's share of new U.S. vehicle sales has shown a small uptick over the last year. Figures reflect share of new retail volume, excluding fleet. | | | | | | | Loan | Lease | Cash or
outside
financing | | 2012 | | | | | Q2 (thru 5/13) | 58.1% | 20.6% | 21.3% | | Q1 | 58.5% | 20.3% | 21.3% | | | | | | 2011 | | | | | Q4 | 58.1% | 19.5% | 22.4% | | Q3 | 59.2% | 19.0% | 21.8% | | Q2 | 57.9% | 19.8% | 22.3% | | | | | | | Source: Power Information Network |
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