Originations

3 suggestions for companies with underperforming employees

CLEVELAND - 

Automotive Personnel chief executive officer Don Jasensky offered three options when dealership and auto finance company management teams are faced with the decision of making manpower changes based on performance.

Jasensky leveraged his nearly 30 years of experience, acknowledging that, “Every leader has to make decisions regarding underachieving employees.”

He continued in a company blog post, saying, “When a leader determines that an employee is incapable or unwilling to perform at the required level, it is time to make a change.  Once a decision is made to replace an employee the question becomes whom do we replace the employee with?”

When considering that question, Jasensky emphasized three options:

—Do not replace the employee and spread the work among existing staff.

—Promote a person to the position, and replace the junior position.

—Look outside the company for an experienced high achiever.

If the company decides that finding a replacement outside the current workforce is the best option, Jasensky articulated four points to keep the issue with the underperforming employee from snowballing into a larger problem that could derail the positive start to 2018 the store or institution might be enjoying.

Among those points, he noted:

—It is best to find the replacement prior to terminating the employee. You do not want a position to go unfilled for very long.

—It is important that you talk to the best people available. Jasensky recommended that companies not limit themselves to respondents to an advertisement. 

“The best people are seldom looking,” he said. “At any given time, only 5 percent to 10 percent of employees are actively looking for a new position. You will be competing both in and outside your industry for their attention.

—If you are not interviewing the best candidates in the marketplace, Jasensky believes the company will not be hiring the best candidate.

—Jasensky also emphasized that managers should keep the position situation confidential.

“Turmoil is created when an employee knows that he or is being replaced,” said Jasensky, who also is a board member of the National Automotive Finance Association.

More workforce recommendations and current industry job listings can be found by going to Automotive Personnel’s website.

Q3 deep subprime originations sink to lowest level ever

COSTA MESA, Calif. - 

The evidence continues to mount showing how much auto finance companies are tightening their underwriting and slowing the volume of subprime paper they're adding to their portfolios.

Experian Automotive reported on Thursday that the number of consumers outside prime (with a credit score of 600 or below) notably decreased during the third quarter, hitting the lowest total finance market share on record since 2012. And the percentage of deep subprime originations sunk to a level never seen previously.

Analysts explained that Experian data shows the auto finance market continues to gain strength and stability. According to Experian’s latest State of the Automotive Finance Market report, prime consumers grabbed the lion’s share of the total finance market (40.9 percent), while super-prime buyers showed the largest increase, reaching 20.16 percent market share.

Melinda Zabritski, senior director of automotive finance for Experian, went so far as to refute again the industry naysayers who have predicted the bursting of the so-called auto finance subprime bubble for some time.

“For some time now, the story has been focused incorrectly on the rise in subprime lending. But the data over the last several quarters has shown that the entire market is growing, not just subprime,” Zabritski said. “The market turning more prime is an encouraging trend. It indicates that industry professionals are using data and analytics as part of the lending process, and consumers are taking a more active role in managing their credit before buying a car.”

The Q3 report also indicated that contract terms for new vehicles extended, and credit quality for obtaining financing for both new and used vehicles notably improved.

The average term for new-vehicle loans hit an all-time high of 69 months. While this statistic could trigger an alarm for some market watchers, Experian pointed out that its findings showed that buyers outside prime decreased by 4.3 percent, making up only 10.74 percent of the new-vehicle financing market.

Analysts also learned that prime and super-prime buyers shifted to used vehicles, growing to make up 49.83 percent of the used market. In comparison, the percent of buyers outside prime have decreased, making up only 31.34 percent of the market (only slightly above last quarter's record low).

Meanwhile, Experian also determined that deep-subprime consumers with a credit score of 500 or below obtaining used-vehicle financing dropped 9.2 percent to sink to an all-time low of 4.64 percent of the market.

“It’s clear that affordability is a driving force in a consumer’s decision to finance a vehicle, and the data shows that consumers are focused on doing what they need to do to reduce monthly payments and obtain the right vehicle that fits their needs, whether it’s buying new or used,” Zabritski said.

“By unlocking the potential of this market data, we can help consumers and the industry achieve more by empowering them to make better decisions,” she went on to say.

Past reports have shown that consumers often choose leasing to reduce monthly payments. But this quarter’s report showed a slight decrease in leasing across all risk categories, as more buyers shift to the financing market. The only exception was the super-prime category, which increased slightly (1.8 percent).

The average amount financed for new vehicles in the third quarter was $30,329, up $291 from Q3 2016. For used vehicles, the average amount financed reached $19,291, an increase of $56 over the previous year.

As for monthly payments? For new vehicles, the average payment was $502 per month, increasing by $6 over the previous year, while used-vehicle payments averaged $365 per month, up $3 from the previous year.

Other key findings from the Q3 2017 report included:

—The average credit score for financing a new vehicle (both installment contracts and leases) was 716.

—The average credit score for financing a used vehicle was 659 (620 for independent and 682 for franchise dealers).

—While average new-vehicle loan terms hit 69 months, the average term for used vehicle loans was 64 months.

—Total open automotive balances reached $1.121 trillion, up 6.8 percent from the previous year.

—The average new-vehicle lease payment was $412, up $6 from Q3 2016.

—The average financing interest rate was 5.1 percent for new vehicles and 8.7 percent for used vehicles.

—Credit unions and captive finance companies increased market share of total vehicle financing, growing to 21 percent and 29.8 percent — an increase of 6.9 percent and 35.1 percent, respectively.

—Banks lost market share of total vehicle financing, dropping 6.3 percent to reach 32.9 percent of the market.

5 major auto financing metrics move higher in November

SANTA MONICA, Calif. - 

Each of the five metrics involving used- and new-vehicle financing that Edmunds tracks each month moved higher in November. That collection includes averages for terms, monthly payment, the total amount financed, APR and down payment.

Edmunds manager of industry analysis Jeremy Acevedo pinpointed a reason why the metrics edged higher year-over-year and are all well above where they stood five years ago.

Acevedo said, “2017 has been the year of the SUV. Consumers have proven time and time again this year that they’re not afraid of the bigger price tags, higher APRs and longer loan terms.”

The following charts summarize Edmunds’ latest finance data.

New-Vehicle Finance Data
  November 2017 November 2016 November 2012
 Term  69.26 months  68.77 months  65.17 months
 Monthly Payment   $524  $518  $471
 Amount Financed  $31,433  $31,022  $27,126
 APR  4.81 percent  4.53 percent  4.09 percent
 Down Payment  $3,906  $3,616  $3,622

 

Used-Vehicle Finance Data
  November 2017 November 2016 November 2012
 Term  67.06 months  66.86 months  63.60 months
 Monthly Payment  $389  $382  $363
 Amount Financed  $21,494  $21,269  $19,127
 APR  7.66 percent  7.36 percent  7.83 percent
 Down Payment  $2,475  $2,345  $2,181

 

Exeter Finance joins RouteOne’s eContracting platform

FARMINGTON HILLS, Mich. - 

The streamlining of financing is happening in the subprime space, too.

RouteOne announced on Monday that Exeter Finance is now an available eContracting finance source for dealers utilizing the RouteOne platform. Officials reiterated eContracting can enable the digital exchange of critical contract documents and data between dealers and finance sources to increase efficiency and reduce contracts in transit.

RouteOne is one of the industry leaders in eContracting, booking more than 8.2 million eContracts to date. RouteOne has more than 6,600 active eContracting dealers that have access to more than 40 finance sources to deliver a variety of financing options. The availability of these finance sources has led to notable growth in RouteOne’s non-captive eContracting share which has more than doubled every year since 2014.

“As eContracting becomes the standard, and not the exception when financing a vehicle, RouteOne’s goal is to make this service available for all financing scenarios,” said Jeff Belanger, RouteOne’s senior vice president of business development. “The demand from dealers is present and we anticipate our integration with Exeter Finance will continue to accelerate eContracting growth.”

Exeter Finance offers personalized service and flexible financing options for credit challenged customers through thousands of franchised dealers nationwide.

“At Exeter, we are continually looking for ways to enhance our dealer experience,” said Brad Martin, Chief Operating Officer at Exeter Finance. “With the addition of eContracting, our dealers should see a decrease in returned contracts and faster funding times.”

 

3 finance companies settle with NYC’s consumer agency for more than $300K

NEW YORK - 

Back in October, New York Mayor Bill de Blasio signed a package of legislation giving the city’s Department of Consumer Affairs (DCA) additional regulatory muscle to combat what officials described as “predatory financing practices in the used-vehicle industry.”

While those new laws go into effect in February, DCA already showed it’s ready to flex its power, finalizing settlement agreements last week with three auto finance companies that specialize in subprime paper — Credit Acceptance Corp., Clover Commercial Corp., and Westlake Financial Services.

The settlement is associated with contracts containing rates as high as 24.9 percent booked through a group of Brooklyn independent dealerships. In total, DCA secured $311,260.57 in restitution for 50 consumers.

In May, DCA charged the dealerships — USA1 Auto Sales, Lenden Used Car Sales, D&A Guaranteed Auto Sales and Linden Used Cars — and their owners with deceptive and unlawful trade practices, including misleading consumers about the price of vehicle, concealing and misrepresenting the terms of sale and financing and failing to inspect the vehicles.

Officials explained Credit Acceptance, Clover Commercial and Westlake Financial Services have agreed to:

— Reimburse $311,260.57 to 50 consumers who were in high-interest agreements with the dealerships and whose contracts were assigned to the finance companies. Consumers who owe money will receive a credit to their account and any amount beyond what is owed will be paid via check. Consumers who no longer owe any money will also receive a check

— Provide restitution to eligible consumers who file new complaints about USA 1 Auto Sales, Lenden Used Car Sales, D&A Guaranteed Auto Sales and Linden Used Cars before March 11, allowing even more consumers the opportunity to benefit from the agreements

— Safeguard consumers by requesting that consumer reporting agencies delete any negative information that was reported in an effort to help repair the consumers’ damaged credit

 DCA encouraged consumers who allegedly were harmed by these dealerships to file a complaint before March 11 so that they can potentially be included in the settlements and receive restitution.

“Thanks to DCA’s efforts, all three financing companies have agreed to pay restitution to consumers who were burdened with exorbitant interest rates on loans they received through these deceptive dealerships,” DCA commissioner Lorelei Salas said.

“The city will not tolerate predatory financing and sales practices. We will continue to hold dealerships and financing companies accountable in an effort to protect innocent New Yorkers from purchasing unusable cars and loans that place excessive financial burdens on themselves and their family members,” Salas continued.

DCA currently licenses 666 dealerships and has received nearly 5,800 complaints from consumers about dealerships during the past four years. Officials indicated the complaints range from instances of forgery on contracts to a dealership’s failure to provide material disclosures to consumers.

As a result of the mediation of consumer complaints, investigations and settlements, DCA has secured more than $2.7 million in consumer restitution and assessed nearly $1.8 million in fines against dealerships over the past three years.

In March, DCA announced charges against Major World, one of the largest independent dealerships in the city with multiple locations in Queens, for engaging in deceptive financing and sales practices that resulted in predatory financing targeting immigrants and New Yorkers with low incomes. Enforcement is one prong of DCA’s efforts to combat these predatory practices, which also includes education and advocacy.

And as mentioned earlier, New York’s mayor got into the fray during the fall as the laws de Blasio signed require dealerships to post a Consumer Bill of Rights and to disclose other information about the vehicle price and financing terms; provide required notices to the consumer in the language used to negotiate the contract; and provide consumers with the option to cancel their contract within two business days of the sale.

This package of legislation was introduced by council member Rafael Espinal Jr., chair of the council committee on consumer affairs, council member Dan Garodnick, and council member Jumaane Williams, following a public hearing hosted by Salas and Espinal.

5 F&I predictions for 2018 from EFG Companies

DALLAS - 

Now that the Thanksgiving turkey has been devoured and the holiday season is in full swing, EFG Companies is looking ahead to 2018, offering its predictions and recommendations for the retail automotive and powersports F&I market.

Company leaders highlighted these insights, formed through thousands of conversations with the nation’s leading dealership principals and finance companies, reflect another year of cautiousness on the horizon. However, EFG Companies insisted there are many options for dealers, finance companies and agents to navigate an uncertain business climate successfully for a prosperous 2018.

“2017 has been one eventful year. We’ve seen three rate increases so far from the Federal Reserve. The CFPB’s influence has been curtailed by Congress and the current Administration. While new unit sales have flattened, the effects of the hurricanes in Southeast Texas, Florida and Puerto Rico — and the California wildfires — loom large,” EFG Companies president and chief executive officer John Pappanastos said. “For the retail automotive and powersports industries, we’re still seeing a holding pattern,” Pappanastos continued while adding, “2018 sales volumes are expected to be roughly the same as 2017, barring any significant economic fluctuations.

“The challenges and opportunities ahead will largely revolve around customer retention, building up the service bay, and leveraging changing consumer trends to foster market differentiation,” he went on to say.

Here is the rundown of the five wide-ranging predictions EFG Companies recently shared:

1. Retail sales to see marginal uptick strained profit margins and increased focus on customer retention.

John Stephens, who is executive vice president of dealer services, insisted OEMs learned a big lesson in 2017. Today’s consumers want SUVs and CUVs.

“As manufacturers update their vehicle line-up, we should see slightly more new unit sales in 2018 than we did in 2017, but not significantly,” Stephens said. “The trend of rising vehicle prices will only continue. Combined with manufacturer incentives, dealer front-end margins will continue to be strained. As such, dealers will increase their focus on their F&I operations from both an up-front profit and a customer retention standpoint.

“Expect dealers to retool their product menus and F&I pay plans based on products that encourage consumers to return for service,” he continued. “In addition, dealers will put an even greater emphasis on their service drive to better utilize their time with the customer and enhance their ongoing communication.

“In this same vein of consumer communication, we’re seeing more dealers becoming open to listing F&I product benefits online as a way to speed up the F&I process, increase consumer interest in available benefits, and increase product penetration rates,” Stephens added.

2. Acquisitions and engagement will be the name of the game for agents.

Going into a second year of relatively flat unit sales, vice president of agency services Adam Ouart explained that agents are already becoming much more engaged with dealerships on a day-to-day basis, and are focusing more of their efforts on increasing their dealership client base.

“In their acquisitions efforts, agents will be much more circumspect and selective when it comes to approaching dealers,” Ouart said. “There will be an increased competition among agents for those higher-volume dealerships, which will force agents to differentiate themselves based on more than just products.

“Strategic agents will take a more engaged approach to both servicing and acquiring clients, identifying needs, providing training, product menu updates, pay plan guidance, recruiting support, pre-owned inventory analysis, and even providing compliance services,” he continued. “This holistic approach will separate the high performing agents from their peers.”

3. Growth potential for finance companies that leverage today’s economic and consumer trends 

Even with rising delinquencies and flat vehicle sales, vice president of specialty services Brien Joyce pointed out that economic indicators continue to be strong.

“As more consumers delayed making their next vehicle purchase in 2017, the pent-up demand will begin to unfurl in 2018 — especially as SUVs hit the market,” Joyce said. “With this in mind, there is growth potential for the auto lending environment in 2018.

“To get in front of more consumers, we’ll see lenders increasing their direct-to-consumer auto lending marketing spend. They’ll also shore up their dealership relationships by buying more aggressively when possible, scheduling ongoing in-dealership meetings at least once a week, and reviewing profit metrics with dealership leadership once a quarter,” he continued.

“In addition, lenders will evaluate other solutions to both protect their loan portfolios and enhance their market differentiation for consumer protection products,” Joyce added.

4. Growth challenges continue for powersports dealers.

Vice president of powersports Glenice Wilder acknowledged the powersports industry saw similar challenges as the automotive industry in 2017.

“Unit volume did not hit projections and we’re seeing more dealers sell inventory at or below costs just to keep it moving. To recoup this lost profit margin in 2018, dealers will be evaluating how to drive as much traffic their way as possible, and how to increase customer retention,” Wilder said.

“We will see more powersports dealers use F&I products to meet both goals,” Wilder continued. “They’ll focus their product menus and pay plans around those products that differentiate them in their given market and encourage repeat business in the service bay.

“In addition, consumer demand for pre-owned inventory will continue to be higher than demand for new, as consumers are still wary of an uncertain economy. For this reason, dealers will utilize strategic CPO programs to differentiate themselves and increase their back-end profit,” Wilder went on to say.

5. More proactive reinsurance positions ahead.

Rick Christensen, vice president of product development noted that Hurricanes Harvey, Irma and Maria, along with the California fires, have taken a toll on dealer reinsurance positions. Right now, Christensen indicated dealers are still working to understand how much these catastrophic events undermined their positions.

“In 2018, they will need to apply the lessons learned from 2017 to rebuild and better insulate their positions for the future,” he said. “One of the biggest takeaways from 2017 is that when a dealer decides to take part in a reinsurance position, they are acting as an insurance provider.

“Yes, reinsurance is a wealth management tool, but the key word in reinsurance is ‘insurance.’ With reinsurance, dealers are insuring that they will cover the risk of an adverse event,” Christensen continued. “In the case of GAP, they are insuring against a total loss. Unlike service contracts, GAP losses are impacted by both single event losses, such as vehicle theft, and catastrophic losses, wherein one event i.e., ‘Harvey’ results in a significant number of total losses. With reinsurance companies, there will always be claims and dealers need to be prepared to take losses, including catastrophic losses, based on the makeup of their portfolio. 

“As far as the immediate need of recouping losses from 2017 GAP claims, dealers need to take a long-term approach. If dealers try to recover the entire amount in 2018, the necessary price increase for product sales may price them out of the market,” he added.

Christensen closed with a recommendation so dealers can handle this challenge.

“A better approach will be to plan to recover the amount lost over a span of three to five years, so as to stay competitive with product pricing,” he said. “In addition, dealers need to re-evaluate how they buffer against future catastrophic events. The best way to do this is to understand your market and the likelihood of a catastrophic event, then price F&I products accordingly.

“For example, dealers operating in areas where hurricanes occur frequently should have higher F&I prices than those who operate in areas where there is little chance for a natural disaster,” Christensen went on to say.

defi SOLUTIONS adds another award to its mantle

GRAPEVINE, Texas - 

It’s indeed a time to be thankful within the team at defi SOLUTIONS.

The company shared that it recently collected another industry honor, being awarded a spot on the 2017 Dallas Morning News Top 100 Places to Work. This is the first time defi SOLUTIONS has participated in the annual contest in which employees nominate their companies as a “best of the best” in the DFW Metroplex.

Priding itself on a dynamic, inclusive company culture, defi SOLUTIONS emphasized that the company works hard to attract top talent and fosters open communication among its employees and between its current and future partners and clients that include banks, credit unions and lenders of all types. The company culture is defined in the defi Freedom Manifesto that encourages all team members to “value communication, work with great passion, and swing for the fences.”

Founder and chief executive officer Stephanie Alsbrooks said, “We’re thrilled to have achieved a spot on the DMN 100 list. It means we’re doing what we set out to do — create an environment that people want to be a part of.

“Each and every one of our team members is a vital part of what we do and where we’re going, and this nomination and award shows us that our employees feel the same about the company,” Alsbrooks continued.

This year was the contest’s ninth year running and attracted more than 2,500 business nominations. The team at defi SOLUTIONS ranked No. 21 of 35 firms in the small company category.

Employees of nominated companies were surveyed by Workplace Dynamics, an independent research firm, and the results were determined based on confidential answers given by employees regarding company leadership, work/life balance, and other key factors. The awards were announced at a luncheon on Nov. 16.

In addition to the 2017 Dallas Morning News Top 100, the company also ranked No. 37 on the 2017 Caruth Institute for Entrepreneurship Dallas 100 list and ranked No. 771 on the 2017 Inc. 5000 list.

Individual honors this year included 2017 EY Entrepreneur of the Year Southwest region award given to Alsbrooks; Auto Remarketing’s Used-Car Industry’s 40 Under 40 Award given to chief product officer Kartheek Veeravalli; and SubPrime Auto Finance News’ Movers & Shakers recognitions awarded to Randy Spradlin, vice president of sales for defi EXCHANGE, an auto finance portfolio marketplace.

Originations slow for fourth straight quarter

CHICAGO - 

It’s no secret that the auto finance industry is taking its collective foot off of the origination accelerator. In fact, TransUnion now has seen originations soften on a year-over-year basis for four quarters in a row.

Displayed one quarter in arrears, TransUnion’s recently released Industry Insights Report indicated that originations declined by 2.2 percent between Q2 2016 and Q2 2017.

Analysts explained the decline was driven by a 5.9-percent drop in subprime, near prime and prime contract openings. They added this downward movement was partially offset by a 3.2-percent rise in originations to the least risky consumers in the prime plus and super prime risk categories over the same time period.

As a result of this shift, TransUnion pointed out that 2.3 points of market share have shifted from subprime, near prime and prime to prime plus and super prime.

While overall auto-finance balances rose 5.9 percent between Q3 of last year and Q3 of this year, the development marked the lowest year-over-year growth rate since Q3 2012. As balance growth slowed, analysts mentioned serious auto finance delinquency rates — contracts more than 60 days past due — rose 7 basis points in the last year to close the third quarter at 1.40 percent.

“Though serious auto loan delinquency rates are slowly rising, we still do not believe this is a cause for concern,” Brian Landau, senior vice president and automotive business leader at TransUnion, said. “The recent uptick in delinquencies was driven primarily by ‘relaxed’ underwriting standards from recent years, which drove non-prime origination growth.

“The recent decline in originations is due to the tightening of underwriting requirements and the slowing demand for new vehicles,” Landau continued. “Despite fewer originations, there is evidence that more people will be opening auto loans in the near term.

“In September, U.S. light vehicle sales increased for the first time this year on an annual basis. Also, there will likely be several thousand new vehicles purchased as a result of the hurricanes in Florida and Texas,” he went on to say.

Q3 2017 Auto Finance Trends

Metric Q3 2017 Q3 2016 Q3 2015 Q3 2014
 Number of Auto Loans  78.6 million  74.8 million  69.8 million  64.6 million
 Borrower Level Delinquency Rate (60+ DPD)  1.40%  1.33%  1.19%  1.20%
 Average Debt Per Borrower  $18,567  $18,361  $17,946  $17,351
 Prior Quarter Originations*  7.1 million  7.3 million  7.2 million   6.8 million
 Average Balance of New Auto Loans*  $20,653  $20,436  $20,097  $19,524

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Q3 2017 Auto Finance Performance by Age Group

Age/Variable 60+ DPD Annual Pct. Change Average Loan Balances Per Consumer Annual Pct. Change
 Gen Z (1995 – present)  1.86%  7.0%  $13,796  2.8%
 Millennials (1980-1994)  1.87%  3.4%  $17,574  2.0%
 Gen X (1965-1979)  1.59%  3.0%  $20,798  1.9%
 Baby Boomers (1946-1964)  0.86%  5.2%  $18,514  0.6%
 Silent (Until 1945)  0.76%  9.2%  $14,608  -1.4%

 

Credit Acceptance responds to accounting and salesforce questions

SOUTHFIELD, Mich. - 

Beyond its originations and collections activities, Wall Street observers questioned Credit Acceptance Corp. leadership about two specific operational areas when executives discussed their third-quarter results.

Investment analysts wanted to know about Credit Acceptance’s strategy for adding to its sales force to enhance its active dealer network, which stood at 7,737 dealerships at the close of Q3 on Sept. 30. That figure climbed by 946 new active dealers; stores that originate at least one contract with the subprime auto finance company during a quarter.

Another conference call participant also wondered how Credit Acceptance is bracing for upcoming changes in accounting regarding the allowance for losses. Last summer, the Financial Accounting Standards Board (FASB) issued an accounting standards update the organization explained was designed to improve financial reporting by requiring timelier recording of credit losses on loans held by financial institutions and other organizations.

What triggered a longer discussion was the salesforce dialogue between call participants and Credit Acceptance chief executive officer Brett Roberts, who shared that the company’s team to generate dealer activity is 30 percent larger now than it was a year ago. While the number of active dealers is higher, analysts questioned the productivity of the sales team since origination volume per active dealer softened by 9.7 percent year-over-year in the third quarter, resulting in Credit Acceptance’s total origination volume dipping by 4.7 percent to 78,589 contracts.

“As we talked about last time, it’s a longer-term play for us to increase the sales force,” Roberts said. “We don’t necessarily expect it to have any impact this year.

“If you go back and look at our history, the last time we increased the size of our sales force, it took us about two years to roughly double the sales force and then approximately three years after that before productivity got back to where it was when we started the expansion,” he continued. “So you’re looking at kind of a five-year process from start to finish. We’re not trying to double it this time, but we are increasing its size significantly, and we expect that’s something that will play out longer term.”

The analyst continued by asking when Credit Acceptance was making a play to carve out more origination volume through franchised dealerships along with its independent store footprint in hopes of driving the active dealer network to the 10,000 mark and beyond.

“We’re reluctant to sort of give you a stated goal long term that this is how big we’re going to get. I mean we’re obviously trying to get as big as we’re capable of getting, and we think adding to the sales force helps us do that,” Roberts said while acknowledging that the largest portion of Credit Acceptance’s originations came from franchised stores, “what we call national accounts, which are the kind of the largest dealer groups in the country."

He continued by adding, “We allow independents to write purchased loans if they’ve closed a pool of 100 loans on our portfolio program. So once we have some experience with an independent, if that’s positive, we’ll allow them to access the other program. And then there’s a limited number of independents that are allowed to write purchased loans from the beginning. Those are independents that we view as kind of quasi-franchise dealers, working to distinguish them from the traditional independents, and we’ve allowed them to write purchased loans as well. But most of it is franchise dealers and the larger national accounts.”

Later in the call, the topic turned to accounting as analysts inquired about how much the modified mandates for reserving for losses was going to impact Credit Acceptance’s financial standing and what preparations the company is already making for the changes to that go into effect in 2020.

“As we’ve talked about on prior calls, we’ve begun our assessment on that,” Credit Acceptance senior vice president and treasurer Doug Busk said. “The guidance is extensive and it’s complicated, and it’s not effective until 2020. Having said that, we’re making good progress. We’re working with our auditors on it. So when we know more, we’ll talk about it. But at this point, we haven’t finished quantifying the impact it will have on our financial statements."

Top-line results

Credit Acceptance reported Q3 consolidated net income of $100.7 million, or $5.19 per diluted share, compared to consolidated net income of $85.9 million, or $4.21 per diluted share, for the same period in 2016.

For the nine-month span that ended Sept. 30, the company’s consolidated net income came in at $293.1 million, or $14.99 per diluted share, compared to consolidated net income of $245.2 million, or $12.01 per diluted share, for the same timeframe a year ago.

As mentioned previously, Credit Acceptance noted its unit and dollar origination volumes declined 4.7 percent and 0.5 percent, respectively, during the third quarter. The number of active dealers grew 5.7 percent while average volume per active dealer declined 9.7 percent.

“Dollar volume declined slower than unit volume during the third quarter of 2017 due to an increase in the average advance paid per unit,” the company said. “This increase was the result of an increase in the average size of the consumer loans assigned primarily due to an increase in the average vehicle selling price and an increase in purchased loans as a percentage of total unit volume, partially offset by a decrease in the average advance rate due to a decrease in the average initial forecast of the consumer loans assigned.

“For three out of the four most recent quarters, unit volumes declined as compared to the same periods of the prior year,” Credit Acceptance continued. “This trend reflects the difficulty of growing the number of active dealers fast enough to offset the impact of the competitive environment on attrition and per dealer volumes.

“In addition, in response to the decline in forecasted collection rates experienced in 2016, we adjusted our initial collection forecasts downward during 2016. While the adjustments have been modest, we believe these adjustments have had an adverse impact on unit volumes,” the company went on to say.

Credit Acceptance named to The Detroit Free Press 2017 Top Workplaces List

In other company news, Credit Acceptance has been selected as a 2017 Top Workplace by The Detroit Free Press.

Credit Acceptance was named the No. 2 workplace in the large company category. This is the sixth year in a row that Credit Acceptance has won a Detroit Free Press Top Workplace honor.

“Credit Acceptance was selected from among hundreds of companies vying for a place on the list,” the company said. “Our ranking was based solely on the results of a team member survey administered by Energage, LLC (formerly WorkplaceDynamics), a leading research firm that specializes in organizational health and workplace improvement.

“Several aspects of our workplace culture were measured, including alignment, execution, and connection, just to name a few,” Credit Acceptance added.

Nearly 60 percent of GM Financial’s Q3 originations fell within prime

FORT WORTH, Texas - 

In the words of General Motors Financial president and chief executive officer Dan Berce, the paper the captive is adding “continues to skew to more prime originations.”

Berce made his latest proclamation when GM Financial shared its third-quarter results, which included $2.2 billion of prime originations. As Berce explained during the company’s latest conference call, that figure constituted 58.3 percent of the captive’s total retail mix in Q3, up from 54.4 percent a year ago.

And with less non-prime coming into the portfolio, Berce highlighted that “as far as credit performance, we did see improvement, again, year-over-year with losses attaining a 1.9 percent level, down from 2.5 percent a year ago. The increase is driven primarily by our continuing shift to prime lending.

“In fact, finance receivables with FICO score less than 620, now comprise just 39 percent of our North America retail loan portfolio compared to 48 percent at calendar year-end 2016 and 51 percent a year ago,” Berce went on to say.

The company indicated its retail finance receivables 31 to 60 days delinquent represented 3.6 percent of its portfolio at the close of Q3, down from 4.4 percent a year earlier. Accounts more than 60 days delinquent constituted 1.6 percent of the portfolio, down from 1.9 percent.

With higher quality paper entering the system, GM Financial tabulated that its income from continuing operations for the quarter that ended Sept. 30 came in at $186 million, compared to $134 million a year earlier. The captive said its income from continuing operations through nine months totaled $635 million, up from $415 million through the first three quarters of 2016.

So far this year, GM Financial has originated in $15.5 billion retail financing with $4.7 billion coming in the third quarter. The outstanding balance of retail finance receivables was $32.3 billion as of Sept. 30.

GM Financial’s leasing segment continues to grow, too, as the captive originated $19.6 billion in lease deals through three quarters with $6.5 billion arriving in Q3.

And on the commercial side, GM Financial reported that its outstanding balance of commercial finance receivables stood at $9.5 billion on Sept. 30, up from $6.6 billion a year earlier. The captive indicated that 874 dealers are leveraging its commercial offerings with 90 percent of that portfolio representing floor-plan financing.

Finally, GM Financial shared that its total available liquidity is $17.8 billion, consisting of $4.0 billion of cash and cash equivalents, $12.7 billion of borrowing capacity on unpledged eligible assets, $0.1 billion of borrowing capacity on committed unsecured lines of credit and $1.0 billion of borrowing capacity on a junior subordinated revolving credit facility from GM.