Credit unions generate record-setting originations pace in 2017

ONTARIO, Calif., and HAUPPAUGE, N.Y. - 

Credit unions continue to make significant strides in booking retail installment sales contracts and vehicle leases. CU Direct and GrooveCar’s CU Xpress Lease recently highlighted just how much success they enjoyed in 2017.

In fact at CU Direct, 2017 represented a record-breaking year.

Credit unions funded 1.8 million contracts through CU Direct’s Lending 360 and CUDL lending platform, generating a record $39 billion in credit union auto paper in 2017, and surpassing the company’s record $32 billion dropped into portfolios in 2016.

Further reflecting its growing marketplace strength, CU Direct credit unions have increased auto originations 100.8 percent since 2013.

Officials insisted that CU Direct credit union partners, as an aggregate, became the largest auto finance provider in the nation in 2017, experiencing 16.2-percent growth, the second highest loan origination growth rate among the top 10 market holders in the nation, according to data from AutoCount.

The company signed new agreements with 71 credit unions in 2017.  At year’s end 1,117 credit unions, serving 47.8 million members, were utilizing the company’s network of technology, including innovative platforms (CUDL, Lending 360), analytics and reporting (Lending Insights), auto-shopping tools (AutoSMART) and retail lending products (OnSpot Financing).

“We are pleased to once again provide a strong return on investment to our shareholders,” said Tony Boutelle, president and chief executive officer of CU Direct.  “Credit unions continue to demonstrate their ability to compete with banks and win in the auto lending marketplace.

“We remain focused on delivering innovative lending technology that helps our credit union partners make more loans and create a better member experience,” Boutelle continued.

And as a result of the auto finance performance, CU Direct also announced that the company’s board of directors approved a 3 percent cash dividend to its credit union shareholders for a record 13th consecutive year.

CU Direct continues to deliver a strong return on investment, generating exceptional value for its credit union shareholders. The company has grown from nine shareholders in 1998 to 108 shareholders in 2017.

CU Xpress Lease releases results for 2017

Meanwhile, GrooveCar’s CU Xpress Lease, the national vehicle lease program for credit unions, recently announced its 2017 performance results, too.

In 2017, nearly 15,000 leases were written by the operation. Since launching in 2006, more than 105,000 leases totaling greater than $4 billion have been funded, and each credit union has been repaid the full residual amount on more than 50,000 matured leases.

“CU Xpress Lease continues to outperform the competitors to deliver a program credit unions can compete with at the point-of-sale,” said Robert O’Hara, vice president of strategic alliances at GrooveCar.

O’Hara highlighted new programs are continually being added to help credit unions reach their lending goals. Making CU Xpress Lease unique are the one-on-one consultations designed to work with credit unions on strategies to penetrate markets served. 

“In southern California, for instance, CU Xpress Lease is seeing increased traction through expansion activities in that region along with the addition of a dedicated dealer relationship manager for that territory,” O’Hara said.

“Working directly with our partners and dealerships is just one of the ways we accomplish increased reach,” he continued. “This is one of the hottest lease markets in the country, credit unions without a lease program will miss out on nearly 70 percent of the new vehicles sold.

“Overall, leasing represents 30 percent of all new-car sales across the U.S., in urban areas this number climbs to 70 percent at select dealers. The goal for credit unions is to be competitive 100 percent of the time,” O’Hara went on to say.

Some other takeaways from 2017’s performance within the CU Xpress Lease program were:

• Average FICO score of 770

• Average term of 36 months

• 65 percent look-to-book

Because CU Xpress Lease manages and assumes all risk at lease maturity, for instance, collection of lease end fees, including termination fees, over mileage charges, excess wear and tear damage, and other fees, popularity of the program continues to climb. The following are just some of the ways the program reduces the burden on credit unions and their members:

• No surprises wear and tear lease return process

• Credit unions paid full residual amount on all matured leases — more than 50,000 leases

• Build and manage dealer relationships

• A team of lease specialists at the credit union’s disposal

CARite secures $45M in funding to boost lease portfolio


CARite received an injection of funds to expand its leasing portfolio from a finance provider that has an understanding of what the company is trying to accomplish within the subprime market.

On Wednesday, Crystal Financial announced the completion of a $45.0 million senior credit facility for CARite. Headquartered in Madison Heights, Mich., CARite sells and leases pre-owned vehicles through their network of owned and partnered CARite locations.

Through Brite Financial Services, the company provides access to lease financing options for consumers with limited or poor credit history.

The companies indicated proceeds from this facility will be used to refinance existing debt and to fund lease portfolio growth.

“At CARite we are focused on making the car purchasing process a better experience through great selection, transparent pricing and multiple financing options,” CARite chief executive officer John Neary said. “At this important juncture in our company’s history, it was critical that our first institutional debt capital partner understand our business and our goals.

“Crystal’s extensive underwriting expertise in the specialty finance sector in addition to their creative structuring approach set them apart as we considered various options,” Neary continued. “Finally, the inclusion of a delayed draw facility as part of the overall commitment will allow us to continue to expand our lease financing business with certainty.”

Crystal Financial is a portfolio company of Solar Capital. As an independent commercial finance company, Crystal Financial provides senior and junior secured loans for both asset-based and cash flow financings (minimum of $10 million in fundings) to middle-market companies.

Crystal Financial co-CEO Steven Migliero Jr. explained why the firm decided to collaborate with CARite.

“John and his team have done a tremendous job building an organization that delivers a very strong consumer value proposition,” Migliero said. “We are excited to help facilitate their future growth and continued success.”

Black Book releases economic scenario-based residuals data tool


Black Book rolled out a new solution on Wednesday meant to mitigate the stress — perceived and actual — that lease providers might have about residual values.

Black Book release its new economic scenario-based residuals that’s now available to finance companies and other institutions with a portfolio of auto paper.

Black Book explained that editors have mapped regulatory prescribed scenarios for this new suite of residual data, enabling risk and portfolio managers to analyze how vehicle values will respond under different macroeconomic Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) scenarios as outlined by the Federal Reserve.

Black Book has historically made available to auto finance companies its projected wholesale residual values of vehicles under baseline and various scenarios. These models were built with extensive analysis of historical sales data taking into account impact from macro-economic variables, fuel prices, vehicle incentives, supply and demand in the used and new markets, and other criteria.

Editors acknowledged complying with the CCAR/DFAST requirements within existing quantitative models and a model risk management framework is one of the most daunting of the many recent challenges for financial institutions. These finance companies have completed extensive work in predicting loss probability using a credit scoring model.

However, Black Book pointed out a key component of loss in auto financing is the severity of loss that is driven by the ability to predict residual values.

Black Book believes that leveraging this new suite of collateral data with economic scenarios at a vehicle level will greatly enhance a finance company’s ability to properly assess risk, and aid in evaluating capital adequacy.

In addition to providing stress testing under CCAR/DFAST-driven scenarios including baseline, adverse and severely adverse, Black Book will also provide residual projections for custom scenarios such as a high-gas price scenario.

“Many auto lenders have greatly enhanced their ability to gain regular insight into portfolio risk, including loss severity by frequently refreshing with updated collateral values,” said Anil Goyal, senior vice president of automotive valuation and analytics at Black Book.

“In addition, using residual data that not only assess accurate forecasted trend of the collateral, but data that is also mapped to specific economic conditions, can provide deep insight on ‘what-if’ analysis of their portfolios,” Goyal continued.

Jared Kalfus, senior vice president of sales and marketing at Black Book, added, “Our scenario-based residuals are the latest enhanced data resource offered by Black Book designed to give our customers the most advanced insight into the performance of a vehicle’s value.

“Our legacy, accuracy of data and analytics innovation today combine to provide the industry’s most successful competitive edge for profit maximization,” Kalfus went on to say.

To learn more about Black Book’s new economic scenario-based residuals, call (855) 371-7532. Black Book also will be showcasing the tool as one of the exhibitors during Used Car Week, which begins on Nov. 13 in Palm Springs, Calif.

RoadVantage enhances benefits for lease customers

AUSTIN, Texas - 

RoadVantage recently introduced what the F&I program provider called a “powerful and innovative” program for lease customers called Preferred LeaseCare.

The company explained this new concept combines the “as you drive” benefits of RoadVantage ancillary products with a lease-end benefit, possibly saving the lessee thousands of dollars through the lease term.

Preferred LeaseCare offers dent and ding repair with a $1,000 hail deductible benefit, windshield repair, interior/exterior repair and key replacement during the term of the lease — all with no aggregate limits. This program adds an additional lease-end benefit of up to $2,000 with no single event limit, covering items for excess wear such as worn tires and wheels, exterior scuffs, bumpers, missing parts and much more.

“We believe this product is a game changer for lease customers because this program allows a consumer to keep their vehicle in the great condition they desire while they drive and offers a great lease end benefit. Innovation is the engine of our success and offering a ‘Better Customer Experience’ is our passion. RoadVantage chief executive officer Garret Lacour said

As the fastest growing provider of F&I programs, this new offering is just another example of how and why,” Lacour added.

Preferred LeaseCare is now offered to agents and dealers in most states across the country. Learn more about it at www.roadvantage.com.

Loan Portfolio Servicing enhances rideshare servicing program

FORT WORTH, Texas - 

Loan Portfolio Servicing (LPS) this week announced the latest expansion of the company’s rideshare portfolio servicing platform, making LPS one of the biggest and most experienced rideshare servicers in the nation.

Most recently, LPS was retained to service 7,000 rideshare leases belonging to two different rideshare leasing companies. Prior to those partnerships, LPS helped Uber bring its Xchange leasing program to fruition and serviced more than 30,000 short-term leases through the spring of this year.

“Three years ago, this type of short-term lease product was practically non-existent. But the surging popularity of ridesharing — especially among millennials — has contributed to the need for flexible lease programs,” said Scott France, executive vice president of strategic initiatives for Innovate Auto Finance and president of LPS.

“From the beginning, flexibility has been one of our core values,” France continued. “We seek to understand what our clients are trying to accomplish and develop strategies that support their vision.

“For example, when Uber approached our company to service their upstart rideshare program, we needed to modify almost all of our processes to accommodate short-term, high-touch leases,” he went on to say. “We recognized a well-timed opportunity to service these portfolios, and our company has invested significant resources toward scaling our infrastructure to support this underserved niche.”

France emphasized the expertise needed to successfully service rideshare portfolios.

“They are not your average leases. We have to manage vehicle maintenance, taxes, tolls, title issues, registrations, citations and excess mileage with a frequency much higher than that of a typical lease,” he said. “All in all, rideshare portfolios behave much more like rental car portfolios and require a specialized servicing infrastructure.” 

LPS has serviced high-touch rideshare portfolios for the past three years. In addition to modifying its processes and procedures, the company has invested in technology that is essential to providing quality service on this type of product.

“It’s fun and exciting to participate in the evolution of the automotive finance and lease arena,” France said. “We are at the forefront of developing viable servicing solutions that support such dynamic financing alternatives. We are always interested in what is next.”

France will speak at Used Car Week beginning on Nov. 13 in Palm Springs, Calif., on how to maximize returns and minimize losses from auto finance and lease portfolios in light of today’s changing markets.

For more information about LPS / Innovate’s services, contact France at scott.france@innovateauto.com or (817) 471-1182.

MUSA Auto Finance launches dealer portal to expedite leasing


MUSA Auto Finance, a company specializing in new and pre-owned vehicle leasing, launched its online portal on Thursday where dealers can submit applications, receive decisions and print pre-populated lease contracts.

MUSA Auto Finance highlighted this portal can automate a typically complicated process in an effort to enable “truly effortless” leasing.

“In an environment where loan terms continue to escalate, customers are being taken out of the market for far too long. That’s why I believe leasing has drawn so much attention over the past couple of years,” MUSA Auto Finance chief executive officer Jeff Morgan said.

“The problem is the standard leasing process is confusing and time-consuming for dealers. It’s so difficult that many dealers don’t even want to consider doing a lease. But our automated leasing program will change that,” Morgan continued.

Dealers can send MUSA the customer and vehicle info, agreed-upon vehicle price, and down payment through Dealerrack, RouteOne or the MUSA portal. Then, MUSA structures the lease.

With one click of a button in the proprietary dealer portal, dealers can print the completed lease agreement and other documents needed to finalize the funding package.

“When we started this company, our mission was to modernize auto leasing so dealers no longer need to worry with complicated worksheets, tedious deal structuring and kicked contracts,” MUSA Auto Finance president Richard Frunzi said. “Leveraging this kind of automation for leasing is unheard of in the industry today — and especially for both new and used cars."

MUSA Auto Finance is now doing business in 29 states, with representatives already on the ground in Alabama, California, Florida, Georgia, Illinois, Missouri, Texas and Washington. The company is also signing up dealers in Arizona, Arkansas, Delaware, Idaho, Indiana, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Montana, Nebraska, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Utah and Virginia.

MUSA recently secured $175 million in funding capacity through a warehouse facility with Goldman Sachs and a capital investment from Crestline Investors. This funding will enable MUSA to launch its auto leasing program nationwide, as well as implement future enhancements to its online portal.

To learn more about MUSA’s leasing program, visit www.musaautofinance.com and click on the dealers tab.

GrooveCar’s leasing program posts 39% growth in Q1


GrooveCar recently highlighted that its auto leasing program for credit unions, CU Xpress Lease, produced a 39-percent year-over-year volume increase during the first quarter.

The growth comes after CU Xpress Lease funded nearly $1 billion in lease volume for 2016.

The first quarter will break vehicle leasing records for credit unions, according to Callahan & Associates, which added that these institutions are experiencing the fastest 12-month share growth rate in 14 years and the third year of double-digit growth.

The firm added that credit unions nationally witnessed new and used auto finance portfolio growth, up by 34.6 percent in Q1, compared to the same span in 2016.

A GrooveCar partner, Teachers Federal Credit Union, headquartered on Long Island with assets of $5 billion, is exceeding the national trend, reporting lease volumes have increased significantly in the last year. In 2016, auto lease volumes were up by 33 percent versus 2015 numbers; in 2017 Q1 volume is up 85 percent.

The success, according to Teachers, is driven by lower money factor rates coupled with competitive residual values.

“Long Island credit unions are making an impact and are now taking business away from captive lenders and banks. This is a profit changer. CU Xpress Lease offers credit unions a means to be competitive at all stages of the auto buying process,” said Frank Rinaudo, senior vice president of GrooveCar’s CU Xpress Lease.

Regional growth for the program is attributed to continued popularity of leasing versus traditional financing. The program continues to drive volume for credit unions and increased sales for Long Island auto dealerships where 90 percent of the franchised dealerships participate in the GrooveCar program. 

“We are thrilled to provide a leasing solution where credit unions and our preferred dealers, here on Long Island, can do some serious business together,” Rinaudo said.

Francis Collins, senior vice president of credit, Teachers Federal Credit Union, also located in Hauppauge, N.Y., agreed.

“The leasing program has been a main driver behind our significant auto loan growth in 2016 and now into 2017. Members are benefiting from the program through low rates and great service at origination and lease termination,” Collins said.

The CU Xpress Lease program can provide a solution for credit unions and their members to participate in leasing on Long Island. Providing a program for consumers allows credit unions and dealerships to do more business together, given nearly 70 percent of all new vehicles sold are through the lease channel.

Robert Kravetz, general sales manager for Huntington Jeep Chrysler Dodge, located on Long Island, reports at his dealership the number of leases is actually higher.

“We are seeing 75 percent to 85 percent of our business through leasing. Of that number, 70 percent of all leases are going through credit unions because the programs work well for the consumer and the dealership,” Kravetz said.

Officials say the Long Island market offers perfect demographics for auto lease growth. There is a strong employment market for a range of age groups who prefer this method of financing.

“We are seeing members of all ages partaking in leasing, many of whom are taking out their second and third lease with TFCU,” Collins said.

Auto leasing relies on residual values of the vehicle; predicting what the car is going to be worth at the termination of the lease.

“Offering low mileage leases, the CUXL program provides flexible mileage options as low as 7,500 miles a year; this keeps the values high,” Rinaudo said, “The combination of the two allows us to provide great lease specials through the credit unions for area dealerships to attract customers. It’s a great situation for both parties.”

In addition to Long Island, GrooveCar’s CU Xpress Lease is a national program that serves credit unions throughout the nation, with sales representatives and support staff to assist credit unions in managing all aspects of the program. The program has been in operation for over a decade with many lease cycles that have made credit unions on the program 100 percent whole when each cycle ends.

To help generate even more business, GrooveCar will be exhibiting at the Las Vegas CUNA ACUC conference beginning on June 25 to promote CU Xpress Lease

The theme of the 2017 conference will be “Discover,” focusing on the future of the credit union movement. The event explores trends that are reshaping the industry and will fuel growth through new ways of thinking.

“This is a very exciting time in the credit union industry; CUNA’s ACUC is taking the lead on promoting the need to stay ahead of trends. When credit unions are provided the right tools, the world opens to new opportunities,” said Robert O’Hara, vice president of strategic alliances at GrooveCar.

O’Hara explained that reaching members through innovation is part of the forward-thinking programs available at GrooveCar.

“As banks begin to get into online car buying, the GrooveCar resource has been ahead of this trend, with years of providing a car shopping experience to members and at the same time offering an auto lease program,” he said.

“Our leasing program makes credit unions competitive 100 percent of the time during the buying process. Credit unions are remaining relevant at every buying stage and staying competitive on many fronts; now is the time to solidify your position with members and strategic partners for the future,” O’Hara went on to say..

Credit unions will be able to experience first-hand the lead generation features built into the platform while at the show, through live demonstrations. Users of the platform can witness how the program is designed to acknowledge when members are performing different tasks during their vehicle-buying journey.

O’Hara added engagement with members is just one of the features that will really stand out for first-time users.

“We continue to provide a seamless digital experience; whether it’s from a stationary computer or on the go from a mobile device, it’s meeting the member where they are, with what they need,” O’Hara said.

Westlake acquires Credit Union Leasing of America


Westlake Financial Services now possesses a significantly larger investment footprint, as on Thursday the company announced the acquisition of Credit Union Leasing of America (CULA), headquartered in San Diego.

The company highlighted the purchase of CULA raised Westlake’s total managed assets from $4.0 billion to $5.5 billion.

Founded by Terry Bowdler nearly 30 years ago, officials highlighted CULA is a respected automobile lessor in the credit union market. Westlake’s investment will support the continued growth of CULA by providing additional resources and financial stability.

“Along with its subsidiaries, Westlake Financial offers indirect financing, dealer floorplan financing, direct-to-consumer lending and insurance products. CULA‘s lease model complements Westlake’s offerings,” said Don Hankey, chairman of Westlake Financial Services. “In addition, CULA’s current affiliations strengthen our growing relationships within the credit union industry.”

Westlake Financial appointed Ken Sopp — who was vice president of Midway Leasing, a Hankey Group subsidiary — as chairman and managing general partner of CULA. The company also noted John Thomas will remain CEO of CULA, and Bowdler will transition to a strategic advisor role.

Officials added Credit Union Leasing of America will remain headquartered in San Diego.

“Our credit union clients, my talented team and our extended family of service providers have been my life for the past 29 years,” Bowdler said.

“As I transition to an advisory role for CULA, I am confident that the company is in great hands with Westlake Financial,” he continued. “The leadership team at Westlake has a deep comprehension of auto finance, a strong balance sheet and an entrepreneurial spirit that will enable CULA to autonomously continue growth for years to come.”

Westlake Financial Services is a member of The Hankey Group. Established by Hankey more than 45 years ago, The Hankey Group is headquartered in Los Angeles and comprised of seven operating companies with 2,500 employees specializing in automotive finance, insurance, auto rental, real estate and technology.

As of the first quarter, The Hankey Group’s total assets are $8.5 billion.

Westlake Financial Services was represented in the transaction by lead corporate counsel Richard Hong along with his team of the Los Angeles-based law firm of Greenberg Glusker. Credit Union Leasing of America was represented by Christian Salaman and Jason Stirling, partners with Pillsbury Winthrop Shaw Pittman, headquartered in New York.

Fitch spots softer credit performance & slowing growth


The latest report from Fitch Ratings indicated U.S. auto loan and lease credit performance will likely continue to deteriorate in the second half of 2016 and into 2017.

Analysts noted year-over-year credit performance deteriorated for auto finance companies in the first half of 2016, despite improved loss rates in the first half of this year relative to the second half of last year, which Fitch attributed primarily to seasonality.

“Fitch expects credit performance to continue to deteriorate going into 2017, particularly in the subprime segment as less tenured auto finance companies with looser underwriting standards have entered the market in recent years,” Fitch Ratings director Michael Taiano said.

Strong vehicle installment contract as well as lease portfolio growth for Fitch-rated auto finance companies continued in the first half of this year due to strong vehicle sales, low interest rates and continued consumer demand for leases and extended loan terms. Although analysts acknowledged the growth rate decelerated slightly from last year.

Fitch is expecting financing growth to continue to moderate, particularly should interest rates rise and used-vehicle values decline, which could impact lease pricing.

Despite the recent credit deterioration, Fitch-rated auto lenders' ABS credit performance continues to be strong relative to historical norms as the average net loss rate increased a modest 8 basis points to 0.73 percent in the second quarter of this year from 0.65 percent in the year-ago period.

The firm pointed out average 30-day delinquencies actually decreased slightly to 3.16 percent from 3.25 percent during the same period.

“Losses among the largest auto lenders remained low, but continue to normalize due to an increase in both loss frequency and severity,” Fitch said. “The average net charge-off rate on the managed portfolios for lenders cited in the report increased to 0.53 percent from 0.43 percent year-over-year.”

Fitch went on to mention that Huntington Bank, Chase and American Honda Finance ended the first half of the year with the lowest credit loss rates largely due to the prime nature of their portfolios and consistent underwriting standards.

“Credit losses and delinquencies for the auto finance industry will likely trend higher as more recent vintages continue to season and recovery values decline from historic highs,” Taiano said.

AFG recent growth includes 6 more credit unions using balloon program


Auto Financial Group — an online provider of innovative financing products including CarMark Auto Finance for credit unions and banks — highlighted its summer growth figures this week, revealing increasing momentum in new customer signings with AFG's Balloon Lending program.

Since May, Auto Financial Group has signed six new credit unions to its Balloon Lending program, resulting in a reach increase of 3,351,865 new consumers. These new organizations include:

—Community Star Credit Union
—Cooperative Federal Syracuse's Community Development Credit Union
—Credit Union of Colorado
—Isabella Community Credit Union
—Palisades Federal Credit Union
—Rutgers FCU

AFG mentioned this group of credit unions represents combined assets of more than $1.75 billion across Colorado, Michigan, New Jersey, New York and Ohio.

“We welcome these financial institutions to the growing AFG family,” AFG chief executive officer Richard Epley said. “Residual based financing is at an all-time high in the U.S. and we’re excited that these institutions have chosen AFG’s Balloon Lending program to offer to their members."

Auto Financial Group also noted that it expects continued growth through the remainder of the year as the company seeks to provide its unique financing products and solutions to financial institutions across the U.S.

The balloon lending program, such as CarMark Auto Finance, can provide institutions with a residual based balloon loan program that is fully insured.

Through AFG's software, financial institutions are able to secure higher-yielding loans with lower monthly payments for their consumers, mitigate residual value risk, and position themselves to take advantage of the record market increases in residual value based financing.