NADA: Financing Availability to Taper Off Slightly

McLEAN, Va. - 

Consumers from up and down the credit spectrum have been able to secure vehicle financing relatively easily for the past 12 months, leading a resurgence in originations and sales of both used and new vehicles.

While that financing faucet is currently flowing strong, analysts from NADA Used Car Guide contend that stream might slacken a bit during the second half of the year.

“Much has been made of the role of pent-up demand in the automotive market’s recovery over the past few years, but less discussed has been the large role credit has played in its resurgence,” analysts said in the “2014 Used Vehicle Price Forecast” special report from NADA UCG

Per data from the Federal Reserve, the report mentioned new-model auto loan interest rates were at their lowest level in at least 40 years in 2013. Analysts also noted that after years of recession-led deleveraging, household debt as a percent of income fell to levels last observed in the early 1990s.

“So not only were interest rates keeping the cost of borrowing very low, the anxiety of taking on more debt was greatly reduced,” analysts said.

NADA UCG reiterated that lender willingness to extend credit has also been very high.

At $850 billion, outstanding auto loan debt exceeded pre-recession levels in the third quarter last year according to the Federal Reserve Bank of New York. Meanwhile Experian Automotive data shows that the below-prime share of used-vehicle loans averaged nearly 56.7 percent through Q3 2013 — up from 2012’s like-period average of 55.9 percent and essentially equal to 2007’s three-quarter average of 56.6 percent.

Additional examples of lender eagerness culled from Experian data include progressively higher loan-to-value ratios and the willingness to extend loan terms.

The average length of new-vehicle loan terms grew from 63 months at the end of 2010 to 65 months through the third quarter of 2013, while used-vehicle terms grew from 58 to 61 months over the same period.

Analysts went on to highlighted the extraordinary conditions of the past few years are also clearly evident in NADA UCG’s credit composite, which reflects credit conditions based on interest rates, the ability and ease in obtaining credit, and consumer comfort with taking on additional debt.

Last year, the composite portrayed credit conditions that were at their most positive level for used vehicle prices in more than 20 years. And by the report’s estimation, credit has added 5 percent to 6 percent to used-vehicle prices since 2010.

“Considering the strength of today’s credit environment relative to years past, we believe conditions will begin to become slightly less favorable toward the latter half of the year as the market transitions from a uniquely positive period to one more in line with historic norms,” analysts said.

“And while the prevailing sentiment is that rates will stay relatively flat for stronger credit tiers, they should begin to inch up for lower-tier borrowers as lenders react to the heightened level of risk presented by the growing below-prime share of loan portfolios,” they went on to say.

Subprime Originations Rise for 5th Straight Year


The latest data from Equifax showed the number of subprime auto financing originations climbed for the fifth year in a row, surpassing 7 million contracts for the first time since 2007.

Analysts indicated the number of subprime contracts for 2013 came in at 7.3 million, up from 6.6 million a year earlier. Back in 2007, the subprime origination amount was 7.8 million, off slightly from the recent high of 8.1 million set in 2006.

“In 2013, the independent auto finance companies, the non-bank, non-captive, non-credit union companies, really led the way,” said Lou Loquasto, Equifax’s auto finance vertical leader.

Loquasto explained to SubPrime Auto Finance News what is providing the fuel for this continued subprime resurgence.

“We’ve seen new companies come into the market and private equity investing a lot into the market. That’s reflecting in the data,” he said.

“It’s because that’s where the highest yields are. These private equity companies can invest in anything they want. When they decide to invest in auto, it’s always in subprime auto because they’re chasing the highest yields,” Loquasto went on to say.

Equifax most recent data also showed that finance companies are putting more faith in subprime consumers since the loan cap for these contracts ended up above $18,000 in December — the first time that’s happened since December 2006. The cap stood at $18,120 in December 2013, marking a significant five-year rise since bottoming out at $14,753.

Loquasto insisted that climbing cap number is a “sign of health,” in the subprime auto finance sector. He noted that as applicants come from deeper into the credit spectrum, finance companies often consider a credit score as a smaller piece of the decision to book the deal and for what terms.

“What’s happening in the subprime market, the lenders are being more sophisticated and precise as to what subprime borrowers they make loans to,” Loquasto said. “They’re using a lot of other data like income data, employment data and length of time on their job and other alternative data.

“They might be lending more money to that 540 FICO score borrower, but they’re doing it because they know that this guy does make this much in verifiable income a month and they have been on their job for say, eight years. And the alternative data is showing they’re paying their cell phone bill, their cable bill and other utilities, data that a lot of these lenders didn’t have access to before,” he continued.

“It’s more of a reflection of auto lenders using more tools and being able to be more sophisticated in how they lend to that segment. It’s more than just a credit score,” Loquasto added.

With more tools at their disposal, Loquasto is confident subprime originations will stay on their current trajectory.

“We’re thinking it will continue to grow but maybe not at the pace that it’s been growing. We’ll probably continue to see a very methodical increase, eventually getting back to the 2006, 2007 levels,” Loquasto said.

NC-Based Lender in Expansion Mode with Former Nicholas Exec


A former senior vice president of Nicholas Financial is looking to duplicate the same success he enjoyed previously now that he is overseeing a North Carolina-based operation fueled by a merchant banking firm.

Douglas Marohn now is chief executive officer at Metrolina Credit Co., which recently acquired locations in Charlotte and Concord, N.C., to go along with the previous purchase of a location in High Point, N.C., by ML Credit Group, an organization affiliated with merchant banking firm Comstock Capital & Advisory Group.

As an indirect, subprime lender, Metrolina provides vehicle financing solutions for both franchised and independent dealers in North Carolina, but Marohn has his eyes on spreading well beyond the Carolinas.

“Metrolina has operated in the North Carolina market for over 20 years and has an excellent reputation for being an honest, straightforward lender, ready to provide financing solutions for its dealer partners. I am excited to perpetuate the brand that Metrolina has established as we expand within North Carolina and additional markets,” Marohn said.

“We have an opportunity to do exactly what I did at Nicholas and grow slowly but methodically,” continued Marohn, referencing Ohio, Florida, Georgia and Tennessee as possible destinations as well as “any state that has favorable laws and rates for our type of business.”

First Orders of Business

Since coming on board earlier this year, Marohn explained to SubPrime Auto Finance News some of the first chores he needed to accomplish.

First, the company had to streamline processes that had been irregular since nearly eight families composed the previous ownership and operated each branch differently.

“Job one was to create identifiable brand identity and brand equity,” Marohn said. “The previous owners, for all the good things they did, there was a splintered, fractional ownership. Our High Point brach operated one way. The Charlotte branch operated another way. The Concord branch operated another. There were a lot of similarities in the way they did business, but there were also some very significant differences whether it was the type of deals they financed or the structure they brought to the table or which products they sold.

“My job right now is to have a universal approach,” he continued. “Metrolina in High Point should be operating the exact same way as Metrolina in Concord or Charlotte to our borrowing customer as well as our dealership customer. Our programs should be the same. Our underwriting should be the same. The level of service and commitment to excellence should be exactly the same.”

Next, Marohn is out to expand Metrolina’s market share and amount of receivables. He explained the company previously was primarily a recourse lender. Metrolina currently has about $12 million in receivables through 2,500 customers.

Marohn said, “20 years ago only a handful of dealerships did subprime. Now they all do. And because Metrolina had plenty of business through their core dealerships, they hadn’t needed to or had the appetite to expand their business in the marketplace.

“We’ve got money to lend,” he continued, referencing the financial backing the company has through First Tennessee Bank. “Nothing is easy, but there is a lot of opportunity out there before we even expand our footprint of branches to expand our business in the markets we’re currently in.”

Underwriting Strategy

Marohn is upbeat about the potential pool of customers Metrolina can tap to build its portfolio. He noted the company’s underwriting strategy isn’t much different than what might be utilized at Nicholas Financial or another subprime finance company.

“Like other successful companies in the true deep subprime space, we bring a common-sense approach,” he said. “There is no cookie-cutter scorecard. There is no credit scoring. We have those internal guidelines, of course, things that we look for when we underwrite a deal. But no one deal is ever the same.

“You can’t buy this paper on a slide rule. You can maybe do that in the high 500, low 600 beacon score ranges when you have little more predictability with the FICO scores and you’re buying a little more in volume,” Marohn went on to say, adding that Metrolina is open to making deals with customers who have credit scores in the 400s.

Why would the company delve that deep into the credit spectrum?

“We are looking at the strength and stability of the customer and their ability to repay the loan based off their income and capacity,” Marohn said. “Then we look at their credit to try to find the best deal structure. We believe that almost any applicant can be approved and a deal can be structured in a positive way. It may not be exactly what the customer is looking to buy. It may not be exactly what the dealer is looking to put together. But we can find a way to approve almost any customer and we do so because we investigate the deal up front.

“We interview the customer prior to decisioning the deal,” he continued. “We know that customer better than usually the dealer will know that customer. We can put together a deal that matches that particular customer’s situation. I always say we don’t sell price, but we do sell pricing. We’re not going to be the highest advance or the lowest rate or the smallest discount, but we will have the structure that best meets that customer’s situation and provides them with the best opportunity to succeed and complete the loan, which is best for everyone. The customer doesn’t have any negative impact. We don’t have any losses, and the dealership sells a car and most likely has a repeat customer.”

Long-Term Objectives

Marohn spent 13 years at Nicholas Financial, leaving in 2011. During that span, he helped to grow Nicholas from a company that had 15 braches working solely with independent dealers to an operation that had more than 70 locations in 15 states where 60 percent of the dealer network was composed for franchised stores.

“The independent dealer has been the core of subprime business and the core of Metrolina, so we’re probably going to be focusing on that independent dealership but not exclusively,” Marohn said. “There’s a lot of great business to be had from the franchise dealerships and we want to be more and more a part of that as we grow.”

Before the end of the year, Metrolina hopes to roll out branch locations in Raleigh, N.C., and Spartanburg, S.C.

“From there, we’ll expand to whatever market makes the most sense. We have no desire to stay in just North and South Carolina. We plan to expand to most every state that is conducive to our business,” Marohn said.

And with Marohn at the controls, Comstock Capital is confident Metrolina can achieve its objectives and more.

“We are extremely excited to partner with Mr. Marohn as we continue to expand the Metrolina platform in North Carolina,” Comstock managing director John Nagy said. “Mr. Marohn’s extensive experience in the indirect auto finance industry, particularly building best in class branch based operating models we believe well positions Metrolina for continued success as we expand the footprint.”

TFS Issues Asset-Backed Green Bond to Fund Consumer Loans and Leases

TORRANCE, Calif. - 

There now is a much larger pool of funds to underwrite contracts for Toyota’s most fuel-efficient vehicles.

Today, Toyota Financial Services issued what the company believes is the industry’s first-ever asset-backed green bond in the amount of $1.75 billion. Officials highlighted the offering was upsized from $1.25 billion to accommodate demand as institutional investors demonstrated strong interest in this inaugural clean transportation investment opportunity.

The company pointed out the green bond is the newest component of TFS’ broad-ranging funding program and serves to enhance Toyota’s green commitment.

Proceeds of the TFS green bond will be used to fund new retail finance contracts and lease contracts for Toyota and Lexus vehicles that meet specific criteria, including powertrain, fuel efficiency and emissions. There are currently nine vehicles in the Toyota and Lexus portfolio of green vehicles that qualify.

“Investors have enthusiastically welcomed the industry's first Green Bond from Toyota Financial Services as a sign of our company's commitment to environmentally friendly transportation,” TFS chief executive officer Mike Groff said.

“The green bond itself represents the innovation that TFS brings to the financial marketplace in creating asset-backed investments that reflect the values of our company.  This, in turn, enables us to provide Toyota customers with attractive financing options for their vehicles,” Groff continued.

To develop the green bond, TFS worked closely with Citi, which has a long-standing relationship with TFS and shares its commitment to green innovation. Citi served as the structuring lead manager of the bond, and BofA Merrill Lynch and Morgan Stanley acted as joint-lead managers.

Officials reiterated their claim that the TFS green bond is the first of its kind in the industry and enhances Toyota’s leadership reputation for green innovation. Toyota currently offers hybrid editions in nearly all of its vehicle categories.

At the end of 2013, Toyota’s global sales of hybrids reached more than 6 million vehicles. The latest million-unit milestone was achieved in the fastest time yet for Toyota, taking just nine months.

Since the launch of the first Prius in 1997, officials determined Toyota’s hybrid vehicles have resulted in approximately 41 million fewer tons of carbon-dioxide emissions than would have been emitted by gas-powered vehicles of similar size and driving performance.

Tyler Dickson, global head of capital markets origination at Citi, said, “We see excellent investment opportunities for the growing interest among investors and consumers alike in environmentally friendly, energy efficient, clean transportation. The marketplace is eager for these investments and Citi is proud to work with Toyota to issue innovative deals like the TFS green bond.”

TFS will commit to use the proceeds of the Green Bond toward the purchase of retail finance contracts and lease contracts for Toyota and Lexus vehicles that meet high green standards as established by three criteria:

— Gas-electric hybrid or alternative fuel powertrain

— Minimum EPA estimated MPG (or MPG equivalent for alternative fuel vehicles) of 35 city / 35 highway

— California Low-Emission Vehicle II (LEV II) certification of super ultra-low emission vehicles (SULEVs) or higher, which would include partial zero emissions vehicles (PZEVs) and zero emissions vehicles (ZEVs)

Qualifying models from Toyota include: Prius, Prius c, Prius v, Prius Plug-in, Camry Hybrid, Avalon Hybrid, and RAV4 EV. From Lexus, qualifying vehicles are CT 200h and ES 300h.

For more information on TFS’ capital markets programs, visit www.toyotafinancial.com. For more information about Toyota’s commitment to the environment, visit www.toyota.com/about/environmentreport2013

Credit Acceptance Posts Gains During Tax Season


Since Credit Acceptance Corp., is planning to purchase up to 637,420 shares of its outstanding common stock later this month, the company offered some operating results for the two months of the year as the industry navigated through the peak of tax season.

Credit Acceptance reported this week that the company enjoyed an 18.1-percent jump in originations above what the finance company posted in January and February of last year. The company originated 39,423 contracts, up from 33,367 deals during the same span a year ago.

Officials added the dollar volume of the contracts they book in January and February also spiked 20.1 percent.

“We believe a delay in federal income tax refunds in 2013 contributed to the decline in unit and dollar volumes during the first quarter of 2013 and may have also contributed to the increase in unit and dollar volumes during the two months ended Feb. 28,” officials said.

The company’s active dealer base also jumped during the first two months of this year. After January and February of last year, Credit Acceptance had 3,822 active dealers in its network. Following the first two months of this year, that amount jumped 17.2 percent to 4,480.

Wells Fargo Maintains Hold of Used-Vehicle Financing Market


Of the Top 20 finance companies in the used-vehicle market, only eight gained market share year-over-year as of the close of the fourth quarter.

And according to Experian Automotive, many of the operations that lost ground in Q4 saw their market shares soften by double digits.

Analysts indicated Wells Fargo continues to be the market share leader in used-vehicle financing, holding 6.83 percent at the end of 2013. That’s up 6.3 percent from Q4 of 2012.

Experian pointed out the next three market share holders made year-over-year gains in Q4, including:

— Capital One: 3.91 percent, up 5.3 percent
— Ally Financial: 3.8 percent, up 3.8 percent
— Chase: 3.79 percent, up 5.2 percent.

Meanwhile, the remainder of the Top 20 used-vehicle financing market holders consisted of companies that made some significant gains or sustained some noteworthy declines. Experian’s Q4 data ended up this way:

— Toyota: 2.24 percent, down 9.7 percent
— Santander: 2.20 percent, down 22.4 percent
— CarMax: 1.54 percent, up 6.6 percent
— Credit Acceptance: 1.53 percent, up 3.5 percent
— Bank of America: 1.37 percent, down 24.1 percent
— Fifth Third Bank: 1.23 percent, down 19.5 percent
— USAA: 0.99 percent, up 2.3 percent
— Huntington Bank: 0.98 percent, down 2.6 percent
— Chrysler Capital: 0.98 percent (no comparison)
— BMW Bank: 0.98 percent, down 0.6 percent
— TD Auto Finance: 0.94 percent, down 40.9 percent
— Westlake: 0.93 percent, down 5.4 percent
— SunTrust Bank: 0.92 percent, down 1.5 percent
— Navy FCU: 0.85 percent, up 8.2 percent
— AmeriCredit: 0.82 percent, down 13.9 percent
— Ford: 0.78 percent, down 17.2 percent

On the new-vehicle side, Experian determined only seven of the top 20 market share holders posted year-over-year gains in Q4. But those companies that did enjoyed jumps of at least 8.8 percent.

The Top 20 new-vehicle market share holders as of the fourth quarter are:

— Toyota: 8.34 percent, down 7.6 percent
— Ford: 8.18 percent, up 9.9 percent
— Honda: 7.99 percent, up 13.1 percent
— Chase: 6.38 percent, down 3.4 percent
— Nissan/Infiniti: 6.31 percent, up 15.6 percent
— Ally Financial: 5.85 percent, down 28.4 percent
— Capital One: 4.40 percent, up 20.0 percent
— Wells Fargo: 4.04 percent, up 17.5 percent
— Chrysler Capital: 2.81 percent (no comparison)
— Hyundai: 2.52 percent, down 11.1 percent
— US Bank: 1.91 percent, down 9.6 percent
—World Omni: 1.89 percent, up 8.8 percent
— Bank of America: 1.86 percent, down 48.9 percent
— TD Auto Finance: 1.84 percent, down 20.8 percent
— PNC Bank: 1.71 percent, up 34.5 percent
— Fifth Third Bank: 1.41 percent, down 19.9 percent
— BMW Bank: 1.39 percent, down 10.7 percent
— RBS Citizens: 1.36 percent, down 16.3 percent
— SunTrust: 1.27 percent, down 19.5 percent
— VW Credit: 1.26 percent, down 23.5 percent

Equifax’s Key Auto Market Trends for 2014


Will buyers flock to showrooms to buy new vehicles this year? Market optimists seem to think so. And most who attended the North American International Auto Show are utterly ebullient. But those who believe the glass is half empty say trends are heading in the opposite direction.

Several key factors are pushing sales up, including:

Rising pent-up demand

While 15.5 million new vehicles were sold in 2013, the gap between the number of new cars that should have been sold and those actually sold is huge — about 26 million vehicles as of year-end.

Scrappage rates up in 2014

Vehicles cycle through owner after owner until they're ultimately scrapped. The ratio of cars scrapped to the total cars on the road — the scrappage rate — measures how many cars are removed from circulation in a given year. Many new vehicles bought during the auto boom years of 1999-2007 are entering the prime period for scrappage, pushing up new vehicle sales in the coming years.

Strong economy, low interest rates and new technology

Most economists believe consumer confidence will rise, interest rates will remain at record lows (around 4 percent for credit worthy consumers) and new technology will draw non-luxury buyers into showrooms. 

The economy is the driving force.  Here are factors that could potentially push sales down:

Auto density dropping

Auto density — or the number of vehicles per driver or household — has been sharply declining since 2006. Even a 1 percent change in this density can equate to as many as one million new vehicle sales annually.

Used vehicles more attractive

The number of new vehicles purchased has been steadily declining since 1976. Rising gas prices have reduced miles driven, and the quality of vehicles has been rising steadily, making them more reliable. These factors have prompted consumers to keep their existing vehicles or purchase a low-mileage used one.

Desire for vehicles waning

Public transportation and ride share services like Zipcar are more cost effective for an increasing numbers of city dwellers. Many millennials, pummeled by the Great Recession and student loan debt, are thinking twice about buying a new vehicle. Similarly, retiring Baby Boomers no longer feel the need to buy a new vehicle every four years.

Final observations on auto market financing

New car and light truck sales for 2014 are estimated to hover around 16.4 million. The number of vehicles financed will likely rise, and the total cost of financing will influence buying decisions. Auto lenders, particularly non-bank lenders, will explore new ways for buyers with less-than-perfect credit scores to obtain credit. Auto loan securitizations among Wall Street investors are on an uptick, which will increase access to financing and raise demand for detailed consumer credit data.

For more information on Equifax Automotive solutions, visit www.equifax.com/automotive.

Dennis Carlson has spent his life analyzing data as a vehicle to better understand the world. His first science fair project was predicting wins in baseball using a calculator and team statistics from the Baseball Encyclopedia.  After graduating from the University of Florida, the life-long ‘data junkie’ studied graduate statistics at Cornell University. A 14-year financial services veteran, Carlson leveraged the power of data, analytics, and predictive modeling to transform how financial institutions and merchants relate to their customers for American Express and First Data before joining Equifax in 2012. He now serves as the deputy chief economist where he continues to tap his unique combination of data science and industry acumen to provide analytical insights to advance the business of both Equifax and clients.

Why Collateral’s Value Retention Even More Vital Today


The staff at Black Blook Lender Solutions envisions underwriting personnel at finance companies watching two computer screens when evaluating an application that arrives from a dealership in their network. One screen shows the applicant’s complete credit history. The other monitor shows the depreciation history and projections for the vehicle expected to be attached to that contract.

“If it’s not happening, it should be,” said Jared Kalfus, the vice president of data licensing at Black Book.

“Data is really becoming paramount and becoming more integrated into that decision-making process,” Kalfus continued. “If you look at it from different angles and benefits you can receive, the data should be analyzed from many different views. You can leverage that data to spot opportunities that might not have been so obvious and new opportunities that might have been easily identified.

“The analytics really help those lenders find new profit centers with vehicles they might not have historically looked at or shied away from,” he went on to say.

Black Book reached out to SubPrime Auto Finance News to continue the discussion generally being dubbed, “the new normal.” It’s a theme that dominated conversations earlier this year when the American Financial Services Association conducted its annual Vehicle Finance Conference. Recent data from J.D. Power and Experian Automotive indicates finance companies are booking more loans at 72 months — maybe even longer — and loan-to-value ratios are climbing.

Black Book editorial director Ricky Beggs believes these trends go back even further than when the calendar flipped to 2014.

“In the last two years during a lot of conversations, similar concerns that pop up are the length of these loans and their loan to value ratios that are out there,” Beggs said. “And because the vehicles are being collateralized a little bit higher, that puts even more questions out there. Then you add in the competition between the lenders. They’re getting pressed and pushed to make more loans to make more profit and get that loan on the books.”

So how do finance companies navigate this ‘new normal’ that doesn’t appear to be going away any time soon? Black Book insisted its Collateral Insight Engine can be a tool to leverage. Product manager Brett Collett ran through some examples with SubPrime Auto Finance News this week to give finance companies some hard figures to consider.

Collett explained a finance company might sustain a $500 loss if a $25,000 loan with a 60-month term and a 4-percent APR ends up in a recovery situation after two years. That loss can balloon up to $3,500 if the term originated was at 84 months but went into recovery at the same junction.

Collett insisted that risk can be mitigated if finance companies can get a better grasp on the collateral value retention projections before even delving into terms that long; again that “new normal” financing companies are encountering.

“That’s a huge spread and risk that those lenders are taking with this pricing competition, and that’s assuming a 15-percent depreciation rate,” Collett said. “But as we all know each vehicle depreciates differently. Understanding the past trends and future projections will determine which side of the fence you might land. Are you going to be in a better position because you’ve got better collateral that you can put longer terms on? Or are you going to be in a worse position because you took riskier collateral with those longer terms?

“Lenders all have proprietary credit models but they rely on a lot of the same data,” he continued. “Having collateral inside that mix can mean the difference between a profitable decision in this ultra-competitive environment versus non-profitable decisions.”

According to Black Book data, used vehicles from the model years 2008 through 2012 depreciated by 1.1 percent overall in February, showing stronger seasonal retention compared to the 1.9 percent rate decline in January.

Beggs indicated average pre-recession depreciation is historically between 1 percent and 2 percent monthly, and Black Book expects overall 2014 depreciation of 13.5 percent.

Beggs also emphasized this time of year is when finance companies should pay extra attention to vehicle depreciation trends. He offered an example of what’s been happening recently with entry-level models, both compacts and midsize cars.

“Overall those are not segments that we feel like are going to be very strong segments retention wise for the overall year,” Beggs said. Some of the reasons are the volume of those vehicles in the marketplace, more players in those segments because of (Corporate Average Fuel Economy) requirements, and the level of gas prices we have right now and what are expected for the rest of the year being stable in relation to what we saw in 2008 and 2009.

“But if you look at the last three weeks, those segments have actually done the best in retention or lack of depreciation,” he continued. “That’s being driven primarily because of this time of the year, the tax season market. These are the lowest priced average cars out there so they fit well in that buy-here, pay-here and subprime market that gets a lot of attention in tax season.

“The fact that you’ve got a difference right now in what these segments should be overall for the year becomes important to see and that’s what Collateral Insight Engine looks at from the big picture,” Beggs went on to say.

Beggs closed with one final point about why finance companies need to monitor vehicle deprecation.

“If you look at dealer side, they have a good grasp of the cars based on their experience of what they’re buying and selling,” Beggs said. “When you look at it from the lender side, they don’t know the car itself but they know lending. They need to be able to depend on analytics to complement their lending experience to determine what is the good risk.”

Here is the complete breakdown of Black Book recorded February value changes of used vehicles for model years 2008 through 2012:

 Bodystyle  3/1/13  2/1/14   Sequential Change  3/1/14  Annual Change
 All Vehicles  $21,051  $18,342   -1.1%  $18,137    -13.8%
 Domestic Car  $14,389   $12,316   -0.6%  $12,244  -14.9%
 Domestic Truck  $19,233  $17,000   -0.9%  $16,845  -12.4%
 Import Car  $22,633  $19,403  -1.1%  $19,191  -15.2%
 Import Truck  $23,423   $20,759  -1.5%  $20,452   -12.7%
 Minivan Cargo  $10,955  $9,386  -3.4%  $9,068  -17.2%
 Full-size CUV  $25,240  $21,544  -2.0%  $21,105  -16.4%
 Midsize CUV  $21,663  $18,815  -2.0%   $18,446    -14.8%
 Compact CUV    $15,220  $12,981  -1.5%  $12,784   -16.0%
 Midsize Pickup  $18,304  $16,889  -1.5%  $16,638  -9.1%
 Midsize SUV    $20,546  $18,005  -1.3%  $17,765  -13.5%
 Entry Level Car  $8,881  $7,399  -1.3%   $7,303  -17.8%
 Prestige Luxury Car   $41,472  $34,796  -1.3%  $34,351  -17.2%
 Luxury SUV  $38,775  $34,437  -1.2%  $34,028   -12.2%
 Premium Sporty Car  $53,286  $46,797  -1.2%  $46,248  -13.2%
 Near Luxury Car  $21,007   $18,189  -1.2%  $17,979   -14.4%
 Compact Pickup  $16,224  $15,215  -1.1%  $15,047   -7.3%
 Upper Midsize Car  $12,918  $11,023   -1.1%  $10,902  -15.6%
 Luxury Level Car   $23,982  $20,658   -1.0%  $20,445  -14.7%
 Sporty Car  $21,957  $18,879   -0.9%  $18,710  -14.8%
 Compact Car   $10,752   $9,130  -0.9%  $9,051  -15.8%
 Compact SUV  $17,023  $15,963   -0.8%  $15,828  -7.0%
 Minivan Passenger   $14,772  $12,745  -0.8%  $12,638   -14.4%
 Full-size Pickup  $24,702   $23,165  -0.7%  $23,010  -6.9%
 Full-size Cargo Van  $14,116   $12,384  -0.5%  $12,327  -12.7%
 Entry Midsize Car  $12,788  $10,611  -0.5%  $10,563  -17.4%
 Full-size SUV  $22,998   $20,430   -0.4%  $20,342  -11.6%
 Full-size Car  $15,265   $12,887  -0.4%  $12,841   -15.9%
 Full-size Pass. Vans  $14,711   $12,804   -0.2%  $12,774   -13.2%


Captives Lead Charge in Rising Used LTVs


Experian Automotive’s most recent data showed how much more risk captive lenders are taking in regard to loan-to-value (LTV) levels when booking contracts for used models.

Experian indicated LTVs for captives that financed used vehicles in Q4 jumped by 306 basis points to an average of 128.6 percent. That year-over-year increase was far more than what Experian noticed for credit unions (up 136 basis points to 135.8 percent) and finance companies (up 115 basis points to 152.4 percent).

Overall, analysts found that LTVs for used-vehicle financing rose 113 points to 133.8 percent.

On the new-car side, Experian determined credit unions pushed their LTVs up the most during the fourth quarter, increasing them by 212 basis points to 115.3 percent. That basis-point amount recorded by credit unions nearly quadrupled the market average, which moved up 56 basis points year-over-year to 110.4 percent.

Looking at the LTV data by consumer credit category, Experian’s data showed the overall aggression in the market to make deals with buyers with damaged credit histories and more negative equity.

For deep subprime — consumers who Experian said have credit scores below 550 — LTVs soared the most year-over-year for both new- and used-vehicle financing. For new, the increase came in at 301 basis points to 126.0 percent, and for used, the jump registered at 220 basis points to 149.2 percent.

The other credit categories outside of prime posted similar increases during the fourth quarter according to Experian, including:

—Subprime new: up 234 basis points to 125.5 percent

—Subprime used: up 164 basis points to 142.3 percent

—Non-prime new: 143 basis points to 122.2 percent

—Non-prime used: up 110 basis points to 136.8 percent

The LTV data dissected by Experian conveyed a similar trend shared in the most recent dealer survey conducted by KeyBanc Capital Markets.

KeyBanc reported that financing availability remains strong as majority of the dealer respondents — 56 percent to be exact — indicated banks and finance companies were becoming more aggressive in January and the remaining 44 percent indicated no change from a year earlier.

The survey results also showed financing for subprime borrowers continued on a positive trend as 60 percent of the dealer respondents indicated favorable conditions remained unchanged and the remaining 40 percent indicated subprime financing continued to loosen in the month of January.

Top 10 New & Used Models for Below-Prime Buyers

IRVINE, Calif. - 

More than a dozen trends arose when CarFinance.com examined its full-year financing data to find out the Top 10 new- and used-vehicle choices for its below-prime vehicle buyers in 2013.

On the new-model side, CarFinance.com discovered the list of most purchased vehicles diverges completely from the overall Top 10 selling vehicles in the U.S.

The site indicated that Kia, a brand known for affordable, fuel-efficient vehicles, dominated its below-prime new-vehicle list, offering the automaker what analysts contend is “an important opportunity to develop loyalty among this customer base as it moves upstream.”

CarFinance.com mentioned Chevrolet performed well in both new and used below-prime categories.

Overall, the site pointed out below-prime buyers continue to purchase new compacts, used trucks and affordable vehicles that may not have a flashy pedigree, but offer great value.

“The CarFinance.com Top 10 Lists offer a snapshot of the vehicle preferences of consumers credited with helping drive U.S. auto sales growth,” CarFinance.com chief executive officer Jim Landy said.

“The automaker brands that show up on these lists should take note: today's below-prime car buyer — who is already re-building credit with a car purchase — could be your brand-loyal prime customer of tomorrow,” Landy continued.

The Top 10 New Vehicles Purchased by Below-Prime Buyers

1. Dodge Avenger and Kia Optima (Tied)

2. Kia Forte

3. Ford Focus

4. Kia Soul

5. Dodge Journey

6. Chevrolet Malibu

7. Chevrolet Cruze

8. Chrysler 200

9. Kia Rio

10. Nissan Sentra

Among the trends, analysts found when compiling the new-model list:

• Compact cars that offer good fuel economy and value in their class heavily dominated the list.

• With four models on the list, Kia “definitely is hitting a mark with this segment. Its range of product is resonating with this buyer,” analysts said.

• More domestics (6) made the list than imports with Kia and Nissan as the only import brands in the Top 10.

• No SUVs or trucks made the list, although the Kia Soul offers an 'SUV-like' vehicle without the expense of actually being one. And the Dodge Journey with a three-row seat option offers family-friendly space, more affordably than the average mini-van.

• Below-prime buyers snapped up the great deals offered by dealerships as they moved the 2013 Malibu off their lots to make way for a design update.

• The most popular vehicle with these consumers, the Dodge Avenger, is an often overlooked midsize sedan that performs well at a competitive price

• The Chrysler 200 is a natural for the list given that it is essentially the same vehicle as the Dodge Avenger: different design but similar incentives.

• Ford Focus is “no surprise” in third place, according to the site, which added, “It’s a well-designed, competitively priced compact, available as a sedan or hatchback, with appeal as a great ride even at the most basic and affordable trim level.”

• The popularity of the Optima, Soul, Rio and Forte, which offer 10-year/100,000-mile warranties, indicate that not only are fuel economy and pricing probably key to this buyer, but so are longer manufacturer warranties

Top 10 Used Vehicles Purchased by Below-Prime Buyers

1. Nissan Altima

2. Chevrolet Silverado 1500

3. Ram 1500

4. Ford F-150

5. Chevrolet Impala

6. Dodge Charger

7. Toyota Camry

8. Chevrolet Malibu

9. Honda Accord

10. Ford Fusion

Among the trends, analysts found when compiling the used-model list:

• The used story is one of trucks and domestic sedans and import sedans that hold their value.

• Domestics (led by Chevrolet) overwhelmed imports with only three import models, Altima, Camry (top-selling sedan in the U.S) and the Accord, cracking the Top 10.

• Unlike the new-vehicle list, which lacks trucks or SUVs, it’s no surprise to see three trucks near the top here, given their overall popularity in the market, their longevity and the value they offer as pre-owned vehicles.

• Chevrolet Impala and Dodge Charger show up as strong choices for consumers looking for larger cars at more affordable prices.