View from the US

BIG WHEELS RANKING
Lender portfolios grow despite sluggish sales
Marcie Belles

Acquisitions played a role in catapulting a handful of lenders
up the financier ranks. Also, some companies’ exit of certain
lending sectors made way for others to gobble up their
marketshare.
Ford Motor Credit Co. clinched the top spot, closing out 2006 with
a $108.5bn (£53.4bn) portfolio, 1.1 per cent higher than in 2005.
No. 2-ranked GMAC LLC saw its outstanding portfolio drop 10.2 per
cent to $92.2bn (£45.3bn). Meanwhile, third-seeded Chrysler
Financial, a unit of DaimlerChrysler AG at year-end 2006 but
subsequently bought by Cerberus, posted a 4.5 per cent gain in
outstanding loans and leases. Chrysler Financial’s portfolio
totalled $84.7bn (£41.7bn) last year, according to Big Wheels 2007
(BigWheelsData.com), an annual ranking of the US’s top auto
financiers.

In all, financiers originated $437.9bn (£215.4bn) of auto loans and
leases last year, compared with $398.7bn (£196.1bn) in 2005. The
ratio of loans to leases remained steady — an 80:20 split in both
years.

PRODUCT DEVELOPMENT
Lenders add novel rewards, discounts to lure dealers
Maya Payne Smart

With vehicle sales sliding and credit markets in turmoil,
lenders are focusing on their dealer-customers to keep volume
flowing. Lenders across the credit spectrum are crafting rewards
programs and floorplan discounts to entice dealers to send business
their way.
“We don’t want to weaken our guidelines and buy worse deals to
compensate for volume,” said Bruce Newmark, president of Westlake
Financial Services. “That doesn’t make good sense. In any
recession, you’ve just got to market harder. If the dealerships do
less business, you have to do business with more dealers.”

This year, Westlake expanded its rewards programs to show
appreciation to loyal dealers, Newmark said. “We have a
[dealer-management system] product that we are offering to dealers
free, which typically costs several hundred dollars a month in the
marketplace,” he said. “We will pay the cost of the subscription
for the dealer for doing business with us.”

Hyundai Motor Finance Co. is reaching out to dealers — and
carmakers. “We work in concert with manufacturers so if there’s a
particular model line that they are focusing on we come up with
collaborative financing programs where we help contribute to their
incentive budget or spending budget,” said Michael Buckingham,
president and CEO.

Meanwhile, GMAC Financial Services introduced new dealer incentives
in August. GMAC’s SmartRewards program targets wholesale financing
dealer customers and reduces qualified dealers’ vehicle inventory
financing expenses. Dealers receive points for buying used vehicles
using GMAC’s SmartAuction web site. They also earn points based on
the volume of retail loans and leases financed through GMAC.

“The North American market is a pretty mature one with a lot of
conquest sales – almost every sale is coming at the expense of
another sale,” said GMAC spokesman Mike Stoller. “Any time our
dealers can have an advantage or we can help them have an
advantage, it works to our interest.”
On the retail side, GMAC’s lending criteria have remained unchanged
in recent months. “We’re not caught changing our underwriting
standards whenever there’s a change in the consumer credit cycle,”
Stoller added.

 

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NATIONAL AUTOMOTIVE FINANCE ASSOCIATION
Study: Sub-prime auto losses, delinquencies rose in
2006

Credit performance began to worsen in the sub-prime auto sector
before this year’s mortgage woes surfaced, according to the results
of the National Automotive Finance Association’s newly-released
survey.

Still, the sub-prime auto space is fairly safe from the problems in
the mortgage sector, the association said.

Last year, sub-prime loan delinquencies increased to 11.6 per cent
from 6.8 per cent in 2005, according to the survey. Repossessions
increased 7.6 per cent, and repossession losses averaged $6,881
(£3,384), compared with $6,586 (£3,239) in 2005.

The study also found that loan terms have been lengthening. Last
year, 76 per cent of sub-prime loans were underwritten for longer
than 60 months, up from 74 per cent in 2005 and 63 per cent in
2004.