Monthly Payment

Autobytel Partners with DriveItNow to Launch Payment Tool

IRVINE, Calif. - 

Autobytel now has a solution site officials insist is an easy-to-use car payment conversion tool for dealer websites that’s powered by DriveItNow.

Autobytel’s Payment Pro can provide online shoppers with instant and customized monthly payment options based on individual credit and inventory eligibility, while delivering pre-qualified leads direct to dealers.

Officials explained how Payment Pro is designed to work:

1. When consumers visit a dealer's desktop or mobile website and click on the Payment Pro button, they're provided with real-time payment information for any of the vehicles in the dealer's inventory.

2. Once shoppers complete the general information form — no Social Security information or birth date is required — the Payment Pro system determines credit eligibility and then instantly displays customized monthly car payment options based on the customer's specific criteria.

3. Payment Pro then delivers the customer's credit eligibility and desired payment information in the form of a first-party lead direct to the dealer.

“When consumers are given upfront information to determine what they can afford on a monthly basis, dealers can be more flexible with pricing and negotiation,” said Phil DuPree, president of dealer services for Autobytel.

“Customers are immediately engaged, haggling decreases and time wasted on showing consumers cars they can't afford is avoided,” DuPree continued. “Payment Pro makes car buying easier for consumers while delivering pre-qualified leads straight from a dealer's website to his showroom.”

DuPree mentioned Payment Pro can offer dealers a variety of additional benefits, including higher quality customer prospects and conversion rates, and the ability for dealers to set their own prices and financing terms instead of engaging in competitive pricing wars that can drive down profit margins.

“The great part about Payment Pro is that it complements the Autobytel mobile website products we offer dealers, and can be easily integrated into a dealer's mobile strategy,” DuPree said.

The technology behind Payment Pro is powered by DriveItNow.

“The team at Autobytel invented online car buying and selling so they understand, more than anyone, the necessary ingredients for successful online automotive sales,” DriveItNow president Tarry Shebesta said.

“Giving dealers the ability to quote customized car payment options upfront saves time, enhances engagement, and increases conversions,” Shebesta continued. “The end result is Autobytel's ability to deliver real-time, pre-qualified leads to dealers straight from their very own websites."

Payment Pro is available immediately for dealer desktop and mobile sites. To learn more, visit http://www.paymentprodemo.com, or contact an Autobytel sales representative at (866) 589-5498.

Equifax Pops Subprime Bubble Talk in New White Paper

ATLANTA  - 

As CNW Research noticed both sequential and year-over-year increases in approvals for subprime vehicle financing so far this month, two Equifax economists took their turn to again reiterate how a bubble is not forming in that segment, contrary to the connection some observers are making to the mortgage meltdown.

In a white paper released on Monday, Equifax explained the three critical components to the bubble formation in the mortgage space going into the recession. Those elements included:

— Rising asset prices (home prices) fueled speculation in residential real estate.

— New-home construction was at all-time high for a sustained period and exceeded population growth.

— The share of mortgages originated to subprime credit borrowers was rising at a time when home purchases were at record levels.

Equifax chief economist Amy Crews Cutts and deputy chief economist Dennis Carlson pointed out in the white paper that as the number of borrowers who were well-qualified to finance a home purchase did not rise in tandem, the credit bubble was fueled by inappropriate lending, which in turn fed the asset bubble.

“While there are always key differences in the housing market compared to the auto market, including housing as a potentially appreciating asset versus an auto that is likely a depreciating asset, the Equifax expert acknowledged there are some similarities in factors that indicate some “effervescence” such as quickly rising sales of new vehicle and an even faster rate of increase in auto lending.

“But looking closely at those similar factors, we see that the auto market of today is just now recovering to pre-recession levels and, unlike the mortgage market immediately prior to the recession, the auto market was not in the same frenzied state at that time,” said Crews Cutts and Carlson, who noted that new-vehicle sales reached their peak level in the first quarter of 2000 and averaged 16.96 million units for the six-year period ending December 2005.

Crews Cutts and Carlson began their white paper titled, “Not Yesterday’s Subprime Auto Loan,” by reiterating the importance subprime financing is to the future of consumers who have damaged credit profiles. The Equifax economists noted the positive consumer ramifications well known to finance company executives at institutions that specialize in subprime contracts such as the importance of quality transportation to enhance employment opportunities and how steady payment performance can possibly lead to a rise toward prime status.

“If a borrower with subprime credit obtains a loan from a financial institution that reports the complete payment histories of their clients to the national credit reporting agencies, and that borrower makes timely payments on that loan and other credit obligations, then over time that borrower’s credit score will likely improve, possibly enough to qualify for prime credit terms,” Crews Cutts and Carlson said.

“If, however, the subprime-score borrowers are precluded from mainstream sources of credit, it becomes more difficult for those borrowers to improve their credit scores,” they continued. “Auto financing in the subprime segment adds to the benefits by enabling credit-worthy consumers to obtain reliable transportation and acquire a valuable, albeit depreciating, asset.”

Adding to the importance and value of subprime auto financing, Crews Cutts and Carlson emphasized that the lending landscape today is not the same as it was in 2007 when experts contend the economy ran into its worst tailspin since the Great Depression.

“Lending in the heyday of the credit boom often greatly underweighted any consideration of credit worthiness outside of a credit score. However, credit scores are predicated on lending underwriting standards being maintained as they were during the reference period used to create them — that is, they explicitly assume that lenders will verify the collateral, capital, and capacity of borrowers just as they always have,” the Equifax economists said.

“Lending has returned to the ‘good old days,’ both because lenders generally have a reduced appetite for risk and because regulatory scrutiny has increased,” they continued. “Specifically, in the subprime auto lending segment most lenders are now verifying incomes today on all loans.

“Given this, loans originated with a 620 credit score today are likely to perform very differently from loans originated with a 620 credit score in 2007, when the loans were likely granted without full underwriting,” Crews Cutts and Carlson went on to say.

And CNW’s data showed the modest increases the industry is currently generating. According to the firm’s August issue of its Retail Automotive Summary, subprime contract approvals are up 5.18 percent in August compared to July and 9.91 percent higher versus the same month last year.

Equifax closed its white paper by pointing out that subprime vehicle financing needs to be monitored carefully, especially given the risk finance companies take providing loans to borrowers in the subprime space.

“The evidence does not support that there is a bubble forming in the auto lending space,” Crews Cutts and Carlson said “It is also beneficial to consider than an unmet need is being satisfied.

“Assuming originations and loan performance in the space remain as they are today, this may benefit the overall economy, as well as the individual participants, in the long run,” they added.

The complete white paper from Equifax is available here.

 

F&I Office Has Hand in Record High 77% of Sales

ATLANTA and SANTA MONICA, Calif. - 

While advocacy groups and federal regulators continue to be skeptical of the convenience and value dealers present at the F&I office, new data from Edmunds.com is showing the volume of work completed in that store department is climbing to levels never previously seen.

Edmunds.com determined only about 23 percent of buyers in July completed a purchase either with cash or financing arranged on their own as opposed to the remaining 77 percent that included some kind of indirect financing orchestrated at the dealership.

Analysts indicated last month’s trend is on track to be the lowest level ever, and down from about 35 percent just five years ago.

"You can't underestimate how important dealer financing has been to this automotive recovery,” Edmunds.com senior analyst Jessica Caldwell said.

The latest auto loan figures back up Caldwell’s declaration. As previously reported here by SubPrime Auto Finance News, Equifax computed that the total outstanding auto loan balance as of June topped $900 billion for the first time.

“What’s great is we continue to see the momentum. Each month, we continue to see it grow and get stronger. It’s a really positive sign for the car market in general. Growing balances will continue to feed healthy growth for the next three to five years,” said Jennifer Reid, the senior director of product marketing at Equifax Automotive Services.

That growth expectation now and down the line isn’t just coming from prime borrowers, either. CNW Research pointed out that the number of subprime buyers in July rose by a “substantial” amount. CNW pinpointed the jump at 25.5 percent versus the same month a year ago.

And growth in deep subprime — borrowers with credit bureau scores below 550 — expanded by nearly the same rate in July, too. CNW indicated the amount of deep subprime borrowers climbed by 23.6 percent year-over-year.

Perhaps at least aiding in that growth — and aiding in profits for both the dealer and finance company — is the work being completed in the F&I office.

“When you think about more than three-quarters of people are at the dealership getting some sort of financial package, it just seems it’s totally changed from the mindset of a long time ago where you saved money and put down a big down payment,” Caldwell said.

“It seems like there are so many people who buy on monthly payment that the dealer works out for them, whether it’s a lease or financing,” she continued. “People just work within their budget saying, ‘OK, that monthly payment works for me.’ That’s why you see so much happen at the dealership rather people checking their own bank or credit union, thinking about how much they can afford before going into the dealership.

“I think (completing financing at the dealership) is a convenience factor, but I also think it’s also sometimes what drives the purchase decision. Some of these offers are so great whether it’s leasing or financing. It can really make or break the deal. Not only is it a matter of convenience, getting your transaction done all in one place, it’s also financially advantageous for people,” Caldwell went on to say.

Student Loans Impacting Today’s Subprime Borrower

CARY, N.C. - 

A new kind of subprime borrower is starting to influence the statistics gathered by Equifax.

Jennifer Reid, the senior director of product marketing at Equifax Automotive Services, acknowledged that dealers and finance companies typically think of subprime consumers as ones with delinquencies, defaults and bankruptcies.

But Reid pointed to the slight uptick in subprime vehicle leasing in April that potentially was booked through special captive finance company programs geared to recent college graduates who might be carrying student loan debt and need the flexibility of a manageable monthly payment.

“When you start charting subprime, you normally just think of 640 and below,” Reid told SubPrime Auto Finance News during a recent phone interview. “But on the retail side, you’ve got to start to think about what’s making up those numbers. They’re not necessarily the subprime customers who have a lot of delinquencies or issues from the past. You’ve got a lot of special captives targeting that younger, first-time college graduates. It may be just someone with a thinner file or no credit. You’ve got a lot of college graduates with special programs out there.”

According to a recent study by the Federal Reserve Bank of Cleveland, analysts cited data from the Consumer Financial Protection Bureau, which estimated that student loans outstanding currently total about $1.2 trillion. That figure is spread among 40 million borrowers, or an average debt of nearly $30,000 per student.

Despite that large amount of debt that’s required to be repaid to federal outlets and cannot be discharged through bankruptcy, Ann Marie Wiersch pointed toward the positives of the situation. Wiersch is a senior policy analyst at the Federal Reserve Bank of Cleveland.

“The range of debt burden varies tremendously from student to student, though many of the graduates with the heaviest debt burden land high-income professional jobs — doctors or attorneys, for example — that put them in a strong position to repay the debt,” Wiersch wrote in a research study posted earlier this year.

“Experts believe that a majority of student loan defaults are concentrated among those who did not complete their education — their default rates are four times higher than those of graduates,” Wiersch continued. “This is not surprising, since many of these dropouts, unlike graduates, are no better able to repay than they were before enrolling.”

Even if these consumers complete their degree, the challenge of finding gainful employment is another element complicating the situation for these potential borrowers, according to Reid. She expects underwriting departments to see more applications arrive with student loan debt registering as a significant part of the background being brought into the situation.

“I think it’s a discussion you’re going to see more of, especially in the next couple of years, and the impact it’s going to have on that demographic getting vehicles,” Reid said. “When you’ve got high loan debt coupled with high unemployment, and they need a car, that equation doesn’t always work well together. That’s definitely going to be a discussion going forward especially with so many vehicles in the next 10 years expected to be sold in that segment.

“On the dealer side as well, they’re going to have to get more comfortable with working with that demographic of customers to have those conversations about having the right vehicle to meet the needs of that demographic,” she continued.

Topics that are going to influence the vehicle financing industry both long-term and in the immediate future such as student loan debt are going to be highlighted throughout the second annual SubPrime Forum, which is again a part of Used Car Week. The SubPrime Forum, orchestrated in conjunction with the National Automotive Finance Association, will have keynote presentations and panel discussions covering subjects such as originations, compliance and more.

“Dealers and lenders are educating themselves and getting more information,” said Reid, part of the Equifax team who will be joined by other SubPrime Forum speakers from firms such as Black Book Lender Solutions, Hudson Cook and Dealertrack Technologies.

“There’s a lot of questions being asked. There’s quite a bit of dialogue happening. As an entire industry, we’re all talking about the changing environment because it’s changing so rapidly,” Reid continued.

“I think it’s very promising to see everyone coming together to talk through some of the challenges that are already here or are on the horizon. They’re recognizing the momentum and trying to find ways to keep it,” she went on to say.

The SubPrime Forum is scheduled for Nov. 11 and 12 at the Red Rock Casino, Resort & Spa in Las Vegas.

For more details about the SubPrime Forum as well as the opportunity for registration discounts, go to subprime.autoremarketing.com.

SAFCo Taps ACI Worldwide for Electronic Bill Payment Solutions

NAPLES, Fla. - 

In an attempt to increase consumer convenience and reduce payment processing costs, Southern Auto Finance Company (SAFCo) recently selected the UP Bill Payment Solution from ACI Worldwide.

Now, SAFCo customers will be able to pay their vehicle loans electronically on a mobile device, computer or via phone with a debit card or ACH (Automated Clearing House). These customers will also have the option to sign up for an ongoing electronic bill payment relationship or to make their loan payment quickly with no sign-up required.

After conducting a broad vendor evaluation, SAFCo chose ACI’s comprehensive and integrated electronic bill payment solution.

“As a finance company, payments are our lifeblood,” SAFCo chief financial officer Gary Stein said. “ACI’s electronic bill payment technology gives us a competitive advantage by providing our customers the easiest and most flexible ways to make their loan payments, resulting in both operational efficiencies and significant cost savings for SAFCo and our customers.”

Richard Crone, chief executive officer of Crone Consulting, explained why it’s important for finance companies such as SAFCo to be flexible in how it takes payments. SAFCo currently operates in 14 states.

“As big banks and regional auto lenders compete for market share, providing convenient bill payment options can increase customer satisfaction, loyalty and future purchase intent,” Crone said. “We see increasing demand from consumers to pay from mobile devices and with debit cards.

“Today’s lenders must not only offer these options, but also the ability for consumers to pay quickly without having to sign up for online banking,” he continued. “Many banks have more than 50 percent of their loans with customers who do not have a checking account at their respective banks, yet banks do not offer electronic payment options for this customer segment.”

With that situation in mind, ACI Worldwide vice president and product line manager Scott Fitzgerald emphasized the value the UP Bill Payment Solution is designed to bring to SAFCo and other finance companies.

“SAFCo recognizes the importance of catering to the wide range of consumer preferences in order to win and retain business,” Fitzgerald said.

“We’re seeing forward-thinking consumer finance organizations expand their flexible bill payment options to include mobile and debit cards,” he continued. “These capabilities provide consumers fast and convenient payment options that make it easier to do business with loan providers.”

Millennials Give Finance Companies New Challenges

FORT WORTH, Texas - 

Beyond the metrics about originations, collections and other figures associated with vehicle financing, the 2014 member survey orchestrated by the National Automotive Finance Association highlighted just how important Millennials are to the present and future of the industry.

During his presentation at the 18th annual Non-Prime Auto Financing Conference, George Halloran discussed at length this new crop of consumers, individuals who are comfortable handling just about any part of their financial lives through the Internet at just about any time of the day. Halloran is the auto finance program director at Benchmark Consulting International, which assembled the survey for the NAF Association again this year.

“I think it’s very much on the minds of all finance sources because what we see is the younger generation, if they’re not shopping, they show up with mom or dad or grandma and grandpa,” Halloran said. “The dealerships are becoming much more connected to this kind of shopping. And the finance source similarly is becoming much more connected because these people want to shop when they want to shop. They want products and services available on their schedule with complete information and transparency.

“It’s kind of like if they wake up at 2 in the morning, eat a Snickers, drink a Red Bull and decide they want to buy a car, they want to do it right then,” he continued. “They want to find their financing then so you have to be online with your offers and processes so they can go to them and almost get to the point of pre-approval.

“In the non-prime market, it’s a little tougher, but that’s what they’re looking for. And the younger shoppers are shopping sometimes not for themselves,” Halloran went on to say.

The dialogue about Millennials that started again at the conference and now continues isn’t something new per se, according to Halloran. During other presentations at NAF Association events, he said the topic of Millennials came up, but now it’s even more pressing since this demographic appears to represent a much larger piece of the potential buying pool.

“I don’t think it’s too much of a culture shock, but it has been something they’ve been monitoring for years,” Halloran said. “It’s an evolution. Right now finance companies are serving two types of marketplaces. Those who are not Millennials, and those who are.

“They might not be actual customers yet, but they have a huge impact on the actual customer in terms of how they operate and the tools they use and information channels they use,” he continued.

Halloran made two other points about how finance companies must approach Millennials.

“These people are very social in the way they define social, which means they want what they want when they want it, and it has to be available in a fully transparent way,” he said.

“They’re not particularly price sensitive. They’re not necessarily shopping for the best price,” Halloran continued. “Their shopping revolves around more of what they want and what they can afford. If they think they can afford something, they’re not just going to look for the lowest price around. If they find something that’s acceptable — that’s what it means to be social to them — that’s the implication in terms of pricing and availability.”

Revamped Study Produces Enhanced Results

The NAF Association included metrics from the past two years in its latest study because officials took a one-year hiatus to revamp the survey process with their partner, BenchMark Consulting International. The association meshed together some of its long-standing analysis with new material provided by Experian Automotive and FactorTrust.

The new product resulted in the NAF Association and its members being able to identify nearly a half dozen challenges that are either new or have been presented but intensified in the past couple of years.

To reinforce the validity of its process, orchestrators pointed out that 77 percent of companies that participated are repeat contributors. The total accounts for the 22 finance companies that completed the survey surpassed 1.2 million, up 5 percent from two years ago when the last survey was compiled. The outstanding balances within the portfolios of the participants exceeded $10 billion, up 10 percent from the previous installment.

The 22 finance companies that participated included:

— AFS Acceptance
— Anderson Brothers Bank
— Automobile Acceptance Corp.
— Chase Auto Finance
— Crescent Bank & Trust
— FIFSG/First Investors Financial Services
— Foursight
— Gateway Financial Solutions
— MarkOne Holdings
— MPH2 Funding
— Nationwide Acceptance Corp.
— PFS Corp.
— Prestige Financial Services
— Regional Acceptance Corp.
— Security National Automotive Acceptance
— Southern Auto Finance
— Summit Financial Corp.
— Tidewater Finance Co.
— Top Finance Co.
— Turner Acceptance
— United Finance
— Westlake Financial Services

“A year and half ago, we decided that the survey questions that were being asked and the report we produced, the information was available from other sources,” NAF Association executive director Jack Tracey said. “We made a conscientious effort to try to find out what the marketplace wanted to know. We then built the survey form we’re using today to gather information so we could produce more relevant information that would be useful and not necessarily available anywhere else.

On top of that we brought in Experian and FactorTrust with their information stratified into just the non-prime markets. We feel now that we’re getting a broader overview of the industry, and the details we are providing hopefully will be some metrics to help manage their organizations,” he continued.

Highlights of Conference

One of the largest crowds ever attended this year’s NAF Association Non-Prime Auto Financing Conference, pushed in part by the presence of the Consumer  Financial Protection Bureau.

“I think it went very well. The feedback has been almost universally favorable,” Tracey said. “People think we really raised the bar this year on what we provided to the people in attendance.

“It was just a good event. It challenges me to keep the conference as interesting as we need it to be,” he continued. “With the CFPB out there doing things, it’s not hard to come up with items that people are concerned about.”

The event started with a Q-and-A session only for NAF Association members with Jeffrey Langer and Eric Reusch, who both are in the Office of Installment and Liquidity Credit Markets with the CFPB. Later a select group had the opportunity to have a lunchtime discussion with both of the CFPB officials who shared their perspective on the regulatory requirements the bureau is asking of finance companies.

“The CPFB people were very pleased with the opportunity to answer the questions the NAF members asked,” Tracey said. “Our people were extremely pleased with the exchange of information, getting a real appreciation for what the CFPB is trying to do.”

The conference included presentations from Sandy Schwartz and Tom Webb from Manheim, Amy Martin from Standard & Poor’s and Steve Chaouki from TransUnion.

Tracey shared one other element he noticed that made this year’s conference unique.

“We had a lot more funders than we’ve had in the past, which is an indication that the market is hot. There’s a lot of money out there,” Tracey said. “You could conclude that there is a lot of money in the marketplace chasing deals so there is a lot of pressure on the finance companies to lower rates or take riskier transactions in order to get the money on the street.

“Generally, those dynamics when there is a lot of money flowing into the market and the competition increases and there is a need for volume, we’ve reached the peak of the cycle and some of the negatives in the marketplace — delinquencies, losses, repos — those trends start to take over,” he continued. “Then, the market slows down a bit because people become spooked.

“The funders are there, and that’s good. But it also creates an environment that people need to be cautious of,” Tracey added.

Survey Shows How Unaware Borrowers Are of Refinancing

NEW YORK - 

A new survey by RateWatch, a banking data and analytics service owned by TheStreet, showed how many consumers are still unaware there are possible opportunities to refinance their vehicle purchase to a lower interest rate than the one set in the initial contract.

Survey orchestrators found that many consumers overlook or are not interested in refinancing their auto loans. Some of the specific results included:

— 27 percent of respondents did not know that refinancing their auto loan was an option.

— 59 percent of respondents knew that refinancing was an option but chose not to refinance.

— Participants ages 30 to 44 were most likely to be aware of auto refinancing options, but only 20 percent had taken advantage of them.

Survey results also showed borrowers who have owned their vehicle for five or more years were most likely to have known refinancing was an option and follow through with a refinance.

But more than half of those who have owned their vehicles for less than five years were not aware refinancing was an option.

“Auto-loan refinancing tends to be somewhat uncommon and it’s unfortunate since consumers can save thousands of dollars in the course of paying off their loan,” said Ross Kenneth Urken, personal finance editor for TheStreet. “It’s a technique more consumers need to recognize as beneficial to their finances.”

The survey also revealed that consumers are paying off their loans with varying interest rates:

— Customers who have owned their vehicle for two through less than five years are most likely to have an interest rate of 2 percent to less than 3 percent.

— The percentage of respondents paying an interest rate between 1 percent and 2 percent is the same as the percentage of respondents paying an interest rate of 8 percent or greater, demonstrating the large range of available rates.

Orchestrators explained this survey aimed to understand the behaviors and preferences of consumers regarding their current loans and future loan plans. Survey responses were obtained through a third party service with questions distributed March 28 to March 30, 2014 to consumers ages 18 and older throughout the United States.

The firm obtained 608 total unique responses with 527 having completed the full survey.

Paymaxx Pro Integrates with Cars Plus DMS

SARASOTA, Fla. - 

This week, Paymaxx Pro integrated its payment processing services with Cars Plus DMS, operated by Radiant Concepts. The alliance is aimed at giving dealers the ability to efficiently provide consumers with more options for payments while simultaneously reducing costs and fees for operators using this dealer management system.

Cars Plus DMS is a management software tool for buy-here, pay-here dealerships that serves hundreds of operators across the states of Texas, Arkansas, Louisiana, Mississippi and Oklahoma.

“We are very excited about the partnership. We believe this integration is a perfect fit for dealers looking to provide customers access 24/7 as well as boosting collections through integrated solutions,” Radiant Concepts vice president Candy Wright said.

“The Paymaxx Pro interface will have a significant impact by eliminating the geographical gap that had previously defined the BHPH model,” Wright continued.

This integration permits dealers to process Web payments and automatically synchronize them between Paymaxx Pro and Cars Plus DMS. At the same time, Paymaxx Pro offers retailers among the lowest costs and fees for merchant services in the industry.

“In today’s marketplace, it is all about providing a robust menu of payment options for consumers while improving operational efficiencies and reducing overhead at the dealer level,” Paymaxx Pro president Chris Leedom said. “We are excited about the strong partnership formed with Cars Plus DMS and look forward to generating savings for the Cars Plus DMS community of dealers.

“All a dealer has to do is select Paymaxx Pro as their merchant services provider through Cars Plus DMS,” Leedom went on to say. “This eliminates the need to use multiple software providers and eliminates double postings, thus saving labor costs. Dealer clients also have the ability to set up recurring automatic payments, both ACH and credit card which are often requested by consumers.”

5 Tips to Help Buyers During Financing Process

WASHINGTON, D.C. - 

In an effort to provide dealers and F&I managers with more educational material so buyers can make better decisions, Americans Well-informed on Automobile Retailing Economics (AWARE) offered five helpful vehicle finance tips for consumers.

Those recommendations included:

• Budgeting helps eliminate surprises. Shop smarter by knowing how much you can afford to spend each month on a vehicle payment. Remember to consider operating costs such as insurance, gas, parking and maintenance. Create a monthly budget with AWARE’s Affordability Gauge at http://www.autofinancing101.org/resources/MonthlyBudgetAffordabilityGauge.xls.

• Become familiar with financing jargon. Many common vehicle finance phrases, such as APR or annual percentage rate, collateral, down payment, and lien, can be found at www.autofinancing101.org/resources/glossary.cfm.

• Determine if buying or leasing is the best choice for you. Learn about your options at http://www.federalreserve.gov/pubs/leasing

• Find the best deal. Compare terms such as rates, down payment amounts, and finance contract or loan length with the interactive worksheet at www.afsaef.org/apply_for_financing.cfm and calculate your monthly vehicle payment with the auto finance calculator at www.autofinancing101.org.

• Negotiate your finance arrangements and terms. Do not sign a contract until you are satisfied with the terms.

“Educating yourself on the basics of vehicle finance can save you time and money,” AWARE spokeswoman Susie Irvine said. “AWARE simplifies the process with a collection of valuable educational resources at www.autofinancing101.org.

AWARE is a vehicle financing industry coalition to help consumers understand how auto financing works. The group provides potential buyers of new and used autos with the tools and resources they need to successfully navigate the auto financing process.

AWARE’s members include American Financial Services Association, National Automobile Dealers Association, National Association of Minority Automobile Dealers, American International Automobile Dealers Association, as well as members of these organizations, including

—Ally Financial
—American Honda Finance Corp.
—American Suzuki Financial Services
—AutoNation
—Ford Motor Credit Co,
—GM Financial
—Group 1 Automotive
—Lithia Motors
—National Auto Finance Co.
—Nissan Motor Acceptance Corp.
—Saab Financial Services Corp.
—Sonic Automotive, Inc.
—Toyota Financial Services
—United Auto Group
—Wells Fargo Dealer Services

Average Terms Hit 66 Months for First Time

SCHAUMBURG, Ill. - 

As the subprime financing market continues to expand, Experian Automotive determined that loan terms continued to lengthen with the average automotive loan term reaching 66 months for the first time.

According to Experian’s latest State of the Automotive Finance Market report, loan terms in the first quarter of this year reached the highest level since the company began publicly reporting the data in 2006.

The analysis also showed that loans with terms extending out 73 to 84 months made up 24.9 percent of all new-vehicle loans originated during the quarter, growing 27.6 percent since the first quarter of last year.

The average amount financed for a new vehicle loan also reached an all-time high of $27,612 in Q1 2014, up $964 from the previous year. In addition, the average monthly payment for a new-vehicle loan reached its highest point on record at $474 in Q1 2014, up from $459 in Q1 2013.

“As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level,” Experian senior director of automotive credit Melinda Zabritski said.

“The benefit of a longer-term loan is the lower monthly payment; however, the flip side of that is consumers can find themselves paying more in interest or being upside-down on their loan if they seek to trade their vehicle in early. It is definitely a choice that consumers will want to weigh carefully before making a final purchasing decision,” Zabritski continued.

Experian indicated that consumers also continued to lease new vehicles at record levels.

Of all new vehicles financed, 30.2 percent were leased in Q1 2014, compared to 27.5 percent in Q1 2013. Interestingly, of all new vehicles sold (whether financed or purchased in cash), a staggering one in four, or 25.6 percent, were leased in Q1 2014, compared to 22.9 percent in Q1 2013.

Overall, loans and leases for new vehicles were easier to obtain in Q1 2014. For new vehicle loans, the average credit score was 714, down from 722 in Q1 2013. For leases, the average credit score was 721 in Q1 2014, compared to 731 in Q1 2013.

“Over the last several quarters, leasing has come back as a very desirable option for consumers,” Zabritski said.

“Whether they are interested in getting the latest and greatest models or simply do not want to commit to a long-term purchase, consumers are leasing new vehicles in greater numbers than ever before,” she continued. “However, what they need to remember is that without good credit, it may be more difficult to get a lease, and that leases have mileage caps so they need to make sure their lifestyle fits the leasing requirements.”

Meanwhile, Experian noticed that subprime financing roses for new vehicles but dropped for used models.

Market share for nonprime, subprime and deep subprime new vehicle loans rose slightly in Q1 2014 to 34.34 percent from 33.68 percent in Q1 2013.

For used vehicles, nonprime, subprime and deep subprime loans accounted for 64.2 percent of all loans, down 2.6 percent from 65.91 percent in Q1 2013.

Zabritski pointed out four other trends from the latest data, including:

—The average credit score for a used vehicle loan in Q1 2014 was 641, up from 637 in Q1 2013

—Average monthly payments for used vehicles rose from $348 in Q1 2013 to $352 in Q1 2014

—New vehicle interest rates rose from 4.47 in Q1 2013 to 4.54 percent in Q1 2014

—Used vehicle interest rates rose from 8.75 percent in Q1 2013 to 9.01 percent in Q1 2014

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