Major moves into B-lending space, new
names top list, finance woes on the web, and titling database

Santander targets higher-credit customers

Santander Consumer USA is expanding its
product menu as it looks for ways to offset a 66 percent drop in
auto loans application volume and offer fresh services to dealers
grappling with lagging sales.

The company plans to enter the B-lending space (for
borrowers with credit scores in the 550-650 range, i.e. near-prime
to prime) in July. Santander Auto Finance, as the programme is
called, will operate separately from Drive, Santander’s subprime

Loans turned down by Santander Auto Finance will
jot automatically be routed to Drive, said Tom Dundon, president
and chief executive of Santander’s auto unit.

“Drive has a different scorecard, different
buyers,” he added.

Dundon said the company leveraged existing data to
create a new scorecard for Santander Auto Finance.

“We think the market is rational for B lenders,” he
commented on the company’s move up the credit spectrum.

The move was sparked by the steep drop-off in
application volume at Drive, itself in turn caused by consumers’
recent tendencies to “buy more responsibly” and keep their cars
longer, he said.

Meanwhile, Santander continues to pilot programme
for direct lending and third-party servicing. So far, 11 dealers
have signed up for RoadLoans, an online direct-lending platform
Santander acquired from Triad Financial last October.

RoadLoans is a fully-automated system that enables
consumers to qualify for loans online, the use of which Dundon
hopes to expand. Ultimately, the company expects to generate
100,000 leads per month.

Santander is also looking into possible joint
ventures and loan refinancing opportunities. It is buying
distressed portfolios and eyeing other strategies for growing its
dealer business.

As for loan performance, delinquencies and losses
have stabilised. Loans originated in 2008 and 2009 are “coming in
at historical levels,” Dundon said, and performing “way better than
2007 [pools]”.

Despite the venture into new segments, subprime
loans originated by Drive will remain the company’s bread and

Dundon declined to estimate how large Santander
Auto Finance might grow, qualifying the statement with: “Santander
B might not even work.”

Captives eclipsed

Chase Auto Finance and Wachovia Dealer
Services overtook captives Toyota Financial Services, Ford Motor
Credit Co and American Honda Finance Co as the top two lenders in
the first quarter, according to Experian Automotive. Overall, the
market share of the top 20 lenders fell to 40.3 percent of total
loans, compared with 44 percent in the same quarter in 2008.

“We are seeing a shift in the market, with more
lenders and larger lenders representing a smaller share,” said
Melinda Zabritski, director of automotive credit at Experian

Web talk points to need for auto loan help

With 85 percent of online chat about auto
loans stemming from consumers either avoiding vehicle purchases or
unable to get loans, lenders should tailor marketing messages to
address concerns from these two categories of potential buyers.

This was the advice offered by Daniel Pavlinac,
senior director in the web intelligence research division at JD
Power and Associates, during a presentation at the National
Automotive Finance Association’s Non-Prime Conference in early

His team downloaded millions of conversations a
week from sites including,, and Twitter
to spot trends related to consumer preference for loans. The group
searched for queries like “looking for a loan”, “trying to get
financing” or “turned down for a loan”.

In its auto analysis – drawn from about 20,000
loan-related conversations per month – the web intelligence
research team identified three major categories of people
discussing car loans: approved borrowers, “frustrated” borrowers,
and “avoiders”.

Among the approved, car buyers were either
“planners” – proactive consumers carefully planning their purchases
– or “reactors” – consumers acting on pre-approvals or
newly-established needs.

Frustrated consumers and avoiders could also each
be further classified into two groups. The former were either
suffering from credit hardship or were sceptics; the latter were
either plagued by a financial setback or budget-conscious.

For the sceptics, “there is a lot of opportunity,”
Pavlinac said. “They need information.”

Craft marketing messages or campaigns that address
their perception that loans are unavailable because of the
recession and economy, he urged. Budget-conscious consumers,
meanwhile, need tools like worksheets, calculators and

The simpler the message, and the faster lenders
reach out to consumers, the more rapidly vehicle sales will

“Let them know it is a good time to buy a car now,”
Pavlinac concluded.

Titling database launched

As lenders step up efforts to monitor
vehicle titling procedures at dealerships, the American Financial
Services Association (AFSA) is gearing up to launch a database to
help them. AFSA’s Titling Contact Database, as the lender-to-lender
clearinghouse is called, will house contact information for titling
executives at participating financial institutions. The purpose is
to eliminate the legwork lenders face to track down executives at
other companies who handle dealer-insolvency issues.

A typical scenario under which the database would
prove its worth could be as follows: A customer finances a vehicle
with Lender A. A few years later, the customer trades in the
vehicle and finances with Lender B. Lender B finalises the loan,
but has not yet received title to the trade-in when the dealership
which sold the new vehicle files for bankruptcy. In the event of a
loan dispute, Lender B must then get in touch with Lender A to
discuss the loan.