F&I and Showroom, May 2016

www fi magazine com 16 F I and Showroom May 2016 is at what profit All that volume will be sold It has to be sold It has to be retailed However Webb said he doesnt expect used car prices to drop far or fast in the short term Separately ADESA Analytical Services said in an April 14 report the average wholesale used vehicle price for March 2016 was 10815 up 17 from a year ago Tom Kontos ADESA executive vice president and chief economist said the increase in the average price disguised the fact that truck prices were up while car prices were down Price softening driven by supply growth remains a visible undercurrent he noted HELP WITH REMARKETING At the AFSAs Vehicle Finance Conference one auto finance executive said he was concerned because a couple of OEMs he wouldnt name had approached him for help remarketing an overabundance of off lease cars We dont do leasing said Ian Anderson president of Westlake Financial Services But one manufacturer called us and asked us what to do with an increase of 90000 off lease returns and how that would affect their valuations Two of them have called us AUTO FINANCE A uto finance sources still expect the Consumer Financial Protection Bureau to crack down on the marketing and financing of F I products like extended service contracts even though its been about three years since the CFPB reached a consent order in that segment of the automotive market I wouldnt be surprised if thats the next focus for the CFPB said John Hyatt executive vice president of dealer services for U S Bank at the American Financial Services Association AFSA s 2016 Vehicle Finance Conference I do think we need to be focused on regulatory issues which I think are coming And with the CFPB now pushing finance sources to lower caps on interest rate markups Hyatt added the pressure will be on F I offices to maintain deal profitability through the sale of F I products Shoe No 1 Drops Back in June 2013 the CFPB reached a consent order with U S Bank and a vendor Dealers Financial Services over an auto finance program for military service members called Military Installment Loans and Educational Services U S Bank dropped its participation in the MILES program and DFS rewrote its consumer disclosures The businesses were also ordered to refund 65 million to service members for marketing that allegedly exaggerated the benefits and minimized the cost of add ons like service contracts Some aspects of the case were unique to service members like the use of automatic monthly allotments to make payments Since then the CFPB has reached consent orders with credit card companies regarding the marketing of add on products but the bureau hasnt revisited F I products No Second Shoe Yet Nevertheless auto finance sources continue to worry I would absolutely agree its an area regulators will be scrutinizing said Dawn Martin Harp head of dealer services for Wells Fargo Dealer Services She said the bank is monitoring auto loans originated through the indirect financing channel as well as F I product sales included in those deals What the bank is looking for is suitability which seemed to imply keeping an eye on pricing We are meeting great support from our dealer customers in this she said Last June the CFPB added new examination procedures for auto finance to its Supervision and Examination Manual They include a section on ancillary products establishing that GAP insurance vehicle service contracts and other add ons are subject to review by CFPB examiners They also ask examiners to determine whether the servicer they are examining offers or finances those products suggesting that finance sources could be on the hook for financing add ons Industry insiders however believe the CFPBs examination will be limited to how the products are disclosed and marketed because it has no authority over dealers But that hasnt stopped the bureau from using its oversight of finance sources to turn the screws on dealers David Paul senior vice president of financial services for American Honda Finance Corp said that like the rest of the industry Honda Finance has regulatory concerns about F I products But he said the captive which agreed last July to lower its dealer markup caps as part of its 24 million settlement with the bureau and the U S Department of Justice would continue to support them because service contracts encourage customer loyalty For us its more for having customers for life he said UNDER THE MICROSCOPE FINANCE EXECS BELIEVE F I PRODUCT SALES WILL BE THE NEXT FOCUS OF FEDERAL REGULATORS LIKE THE CFPB The growing supply of late model used cars looser credit standards and longer loan terms headed the list of concerns for speakers at the 2016 Vehicle Finance Conference with TD Auto Finances Andrew Stuart saying Were in interesting times Westlake Financials Ian Anderson said he was concerned because a couple of OEMs had approached him for help remarketing an overabundance of off lease cars while Chicago area dealer Joe Castle said hes noticed finance sources relaxing approval standards beyond what he considers reasonable U S Banks John Hyatt said he expects the CFPB to crack down on the financing of F I products