F&I and Showroom, March 2014

March 2014 F I and Showroom 13 The biggest risk is when the economy and competitive cycles collide Berce said But I think the next economic cycle has a bit of a runway As for Toyota Financial Groff said the captive continues to run simulations to ensure the company has enough funding to withstand a future crisis We dont get funding from Japan he clarifi ed We have to stay competitive like everyone else Melinda Zabritski senior director of automotive fi nance for Experian Automotive said none of the data she has seen indicates that the market is slipping into a dangerous race for market share The industry is moving at a brisker pace with outstanding loan balances reaching a new high in the fourth quarter rising 11 from the year ago quarter to 7985 billion However she noted 30 day delinquencies fell 35 from a year ago while the 60 day delinquency rate remained fl at Terms are rising however Zabritski noted that year to date data in November showed that terms between 61 and 72 months accounted for 421 percent of originations with the 73 to 84 month term band showing the most growth She said she had even noticed growth in 85 month terms and above The numbers are small despite the growth she said noting that most loans originated at terms above the 84 month band were for luxury makes and vehicles fi nanced for business purposes Members of the NADAs board of directors were asked about the stretching of terms particularly 97 month loans during the Vehicle Finance Conferences NADA Leadership Panel They agreed longer terms arent good for the industry but they were split on whether fi nance sources should reel them in Weve got to realize that a 97 month payment is not good that 150 fi nancing over book is not good said David Williams a member of the NADA board of directors and president of Newark Del based Anchor Buick GMC McConnell president of Montgomery Ala based McConnell Honda and Acura and panelist Brian Leary vice president of F I for the Salt Lake City based Larry H Miller Dealerships didnt disagree but they said its critical that those options exist It may not be good for customers but they need to have options Leary said And for us to service the demand we need those options According to Equifax the total balance of new credit for auto loans from January to December 2013 accounted for 49 of all new nonmortgage credit with 202 billion new auto loans originated for a total of 4052 billion the highest origination total in eight years But just like Experians Zabritski found balances rose as delinquencies fell to levels not seen since mid 2006 Lou Loquasto Equifax Auto Finances vertical leader said theres a simple reason for those milestones data He said fi nance sources are looking beyond credit scores and seeking out new data sources which is why Equifax has invested heavily in its auto business unit the last three years Those investments led to the launch of a new income and employment verifi cation tool in 2012 This year the company added payment history verifi cations for expenses such as rent telecom and insurance Its designed to eliminate stips on subprime deals saving time for fi nance sources while allowing them to improve their capture rate Loquasto said adding that the solution is also available to dealers Finance sources have adopted big data As for dealers we always talk about tech but we dont talk about data Seeking Answers Data is what the AFSA is using to respond to the CFPBs concerns In January the association kicked off a yearlong study that will examine rate participation and other compensation models Chris Stinebert the associations president and CEO mentioned the study during his address to open the second day of the AFSAs conference We all want to do the right thing he said We just want to make sure the direction is the right one The CFPBs Ficklin spent most of her 40 minute session reviewing the guidance the bureau issued last March That document laid out the bureaus expectation for how rate participation policies should be managed and monitored Ficklin also discussed the bureaus 98 million consent order against Ally Financial which the bureau alleged overcharged more than 235000 minority borrowers in Data was a big topic during the Vehicle Financial Conferences CEO Panel with executives from GM Financial Chase Auto Finance and Toyota Financial Services saying theyre fi rms are operating with more data than ever before