Credit Acceptance keeps income rising despite headwinds


Credit Acceptance Corp. posted year-over-year income increases even as company leadership acknowledged the difficulty in keeping originations coming through its dealer network as well as intensifying regulatory demands.

This past Friday, a few days after sharing its fourth-quarter and full-year financial results, Credit Acceptance said it received a civil investigative demand from the Federal Trade Commission on Nov. 7. Credit Acceptance said in a filing with the Securities and Exchange Commission that the FTC is seeking information on the company’s polices, practices and procedures in allowing dealers to use GPS starter interrupters on vehicles.

“We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time,” the company said in the filing. “As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.”

When the company released its fourth-quarter and full-year results, an investment analyst spotted an increase in its general and administrative expense of $2.7 million, or 27.6 percent. Credit Acceptance said it was primarily as a result of an increase in legal fees.

The analyst pressed and asked, “What was the increased legal fees that you guys noted in the press release?”

According to a transcript of the quarterly conference call posted by Credit Acceptance, senior vice president and treasurer Doug Busk replied, “Nothing specific there. We just have a bunch of issues ongoing that are consuming increased amounts of legal resources.”

Nevertheless, Credit Acceptance reported that its Q4 consolidated net income came in at $87.6 million, or $4.33 per diluted share, up from $80.0 million, or $3.84 per diluted share, during the same period a year earlier.

In all of 2016, the company generated $332.8 million, or $16.31 per diluted share, in consolidated net income, marking a rise from the 2015 figures that were $299.7 million, or $14.28 per diluted share.

Credit Acceptance also mentioned its adjusted net income, a non-GAAP financial measure, for Q4 climbed to $96.7 million, or $4.79 per diluted share. A year earlier, it was $83.3 million, or $4.00 per diluted share.

For the year, the company’s adjusted net income totaled $360.6 million, or $17.67 per diluted share; a rise from $309.8 million, or $14.77 per diluted share, compiled during 2015.

Originations and dealer relationships

Credit Acceptance finished 2016 with originations softening a bit during the fourth quarter. But for the full year, the company’s origination figure jumped by 10.9 percent.

The company secured 74,340 contracts in Q4; a figure 5.6 percent lower than the 70,179 originations posted during the year-earlier quarter. For all of 2016, Credit Acceptance took in 330,710 contracts, up from 298,288 booked in 2015.

The quarterly drop-off in originations prompted the opening question during Credit Acceptance’s conference call. Perhaps a reason why is the company posted double-digit gains year-over-year in quarterly originations for seven consecutive periods, including a high of 41.3 percent in Q3 of 2015.

“I think the first factor I would look at is the competitive environment,” Credit Acceptance chief executive officer Brett Roberts said. “That certainly makes things challenging. We're not getting any improvement there, but I don’t think it got any worse either.

“So I think what you saw in the fourth quarter is — as we talked about in prior calls — our strategy when the environment is competitive is to focus on growing the number of active dealers,” Roberts continued. “It is difficult to grow volume per dealer when it is very competitive. But as I think we alluded to several quarters ago, as the base of dealers gets bigger, it becomes more difficult to grow that at a fast enough rate in order to offset the decline in volume per dealer, and to a lesser extent, attrition. So that is what we're seeing right now.”

Roberts also mentioned another factor that might have impacted how much paper Credit Acceptance brought into its portfolio during Q4.

“I think in the fourth quarter, the other thing that came into play is, we addressed some of the negative variances that we have seen in recent originations. When we do that, it causes our initial collection forecast to decline, which means we advance the dealers less money. So that has a one-time impact on volume per dealer, and also on attrition,” Roberts said.

Credit Acceptance closed Q4 with 7,260 active dealers. The company considers a dealer to be active when a dealership has received funding for at least one contract during the period. The investment community wondered if Credit Acceptance might hit a ceiling for its active dealer network at perhaps 7,500.

“I think it’s too early to call it a ceiling. It's definitely a point of resistance. If the competitive environment, obviously, if that changes, that will change everything. But if we assume that the current state continues for the foreseeable future, I would look at it, at this point, as a point of resistance, and not a ceiling,” Roberts said.

More details of incoming contracts

The average contract amount and term Credit Acceptance added into its portfolio in Q4 hit new highs. The company reported the average amount financed was $18,218 and average term was 53 months.

For perspective, Credit Acceptance pointed out that back in 2007, those metrics were $13,878 and 41 months.

“We write terms all across the spectrum, from six months to 72 months, so the average term is a function of the mix. We do not have any current plans to increase the maximum term beyond 72. So the average will just be a function of our pricing strategies and where we see the most opportunity,” Roberts said.

“As we’ve talked about in prior calls, over a period of time when I first started, we would only write a 24-month loan. And we accumulated data and extended it out to 30, and accumulated more data, and we walked our way out to 72 months over a period of about 25 years. So we have been careful about it. And we’re comfortable with the terms that we offer now,” he continued.

Three parts of internal changes

As Roberts referenced, Credit Acceptance indicated that the company enhanced its methodology for forecasting the amount and timing of future collections on contracts through the utilization of more recent data and new forecast variables. The company spelled out three components involved in the implementation of the enhanced forecasting methodology that went into effect as of Oct 31, including:

• Decreased the forecasted collection rates for contract assigned in 2015 and 2016 and increased the forecasted collection rates for contracts assigned in 2011 through 2013

• Reduced forecasted net cash flows by $1.8 million, all of which related to indirect dealer contracts

• Did not have a material impact on provision for credit losses or net income

 “We periodically refresh the model. So it is based on all the information we collect, both at loan origination, and as the loan moves through the servicing process,” Roberts said. “So it is really just mostly an update of the data, a refresh there. And also we redo the actual scorecard and re-weight the variables based on what seems to be most predictive.

“So it is something we do periodically, it’s more of a routine update. And really, the numbers were not all that different from what we had before,” he added.

Don Foss mentioned

Credit Acceptance announced back on Jan. 4 that founder Donald Foss, who most recently served as the company’s chairman, decided to retire as an officer and director. At that time, the company indicated the board had no intention to fill the chairman’s role or to fill the vacancy on the board created by Foss’ retirement. Credit Acceptance added the board of directors will be led by lead director and chair of the audit committee, Thomas Tryforos.

When the topic was broached during the Credit Acceptance conference call, Roberts reiterated the same company intentions.

“No, there are no plans at this point to have a chairman. We have a lead director. But we don’t need a chairman, and we have no plans to replace him,” Roberts said.

F&I notes: 3 developments from Wise F&I and RoadVantage

ST. LOUIS and AUSTIN, Texas - 

Wise F&I, which offers a full suite of finance and insurance products, announced on Monday that its products are now available to automotive retailers operating on the Reynolds and Reynolds dealership management system (DMS).

Dealers can leverage Wise F&I offerings through the product rating and booking (PRB) tool within a Reynolds DMS. The company explained this seamless access includes Wise F&I’s full suite of branded protection products, including GAPWise, WiseCARE, TIREWise, WiseTVP, THEFTWise and KEYWise.

With online capabilities such as eRating and eContracting, Wise F&I said this new access will provide accuracy and efficiency for the dealer and additional customer support for the vehicle buyer.

“Throughout 25 years in the automotive industry, Wise F&I has focused on providing the best automotive finance and insurance protection products to our clients and consumers,” said Matt Croak, president of Wise F&I.

“We’re pleased to be working more closely with Reynolds and Reynolds and expect this new enhancement between Wise F&I and the Reynolds Product Rating and Booking tool will enable our mutual dealership clients to more easily, efficiently, and accurately offer our branded protection products to their customers,” Croak continued.

In other company news, Wise F&I recently completed integration with OptionSoft Technologies that can allows dealers to access of Wise F&I products through one of the leading menu providers in the automotive software industry.

Wise F&I now has its full suite of branded products including GAPWise, WiseCARE, TIREWise, WiseTVP, THEFTWise and KEYWise, all available on the OptionSoft menu. The integration cab provides up-to-date pricing, speed and accuracy for the dealership.

Croak highlighted that Wise F&I and OptionSoft integration in turn can deliver a better vehicle buying experience.

“We are always looking at ways to create efficiencies and to better support the car buyer,” Croak said. “OptionSoft supports that through our products direct availability on their menu system.”

RoadVantage expands dealer training

RoadVantage recently launched what the company believes is a cutting-edge dealership training program optimized to help stores sell to today’s Internet-educated shoppers.

“Today’s dealership customers are a new breed of savvy — their shopping habits have evolved radically in the last decade,” said Garret Lacour, founder and chief executive officer of RoadVantage. “Dealership practices must evolve accordingly.”

RoadVantage is offering F&I and sales operations training in partnership with The Academy, an Austin, Texas-based training center that has developed a curriculum specifically designed with today’s Internet-educated consumer in mind.

“The Academy's uniquely developed process recognizes that a shift in mentality and focus is necessary in the face of today's more informed customers,” said Tony Dupaquier, director of The Academy. “Post-training surveys indicate that students who attend The Academy experience higher closing ratios, profit margins and CSI scores.”

The RoadVantage Dealer Training Program includes workshops for personnel at all levels within F&I and sales operations. The comprehensive training covers a wide range of topics and can take place onsite at the dealership, or at The Academy’s state-of-the-art training facility in Austin, Texas.

Self-paced online training modules are also offered.

“Everyone knows consumers are researching and shopping online, so it’s time we equip dealers with the tools they need to effectively reach them,” Lacour said. “This is a big initiative of ours. Last fall we created free online videos, available to all dealers nationwide, to drive consumer awareness of F&I programs before they go into the dealership to purchase their vehicle.

“Alongside our free online dealer videos, our new dealer training program is another example of how we are working to help dealers provide a better customer experience,” Lacour went on to say.

The free dealer videos are available on the RoadVantage YouTube channel.

More information on the RoadVantage Training Program can be found at http://roadvantage.com/training.

Dealers still see good credit availability


The latest dealer survey orchestrated by KeyBanc Capital Markets showed participants ended up being evenly split when describing credit availability to their customers.

According to the survey conducted in December, KeyBanc found that 50 percent said credit availability remained intact during the fourth quarter with the other 50 percent stating auto financing loosened.

That availability appeared to help dealers generate more gross profit in their F&I offices. KeyBanc reported that 80 percent of participating dealers enjoyed a rise of about $50 per unit year-over-year during Q4 with the remaining stores saying their F&I gross per unit stayed relatively flat.

What dealers told KeyBanc reflects how important credit availability is. Cox Automotive chief economist Tom Webb reiterated the point, too, when he conducted his quarterly conference call at the beginning of January.

“Certainly No. 1, retail credit is the lifeblood that keeps the used-vehicle market moving,” Webb said. “It has been extremely favorable throughout this recovery. I think it pulls back a little bit this year, but still to the net positive. We couldn’t have gotten any better than where we were.

“I think interest rates overall will be showing a bit of an uptick. But as the only saying goes, ‘It’s the availability of credit, not the cost of credit,’” he continued. “If there is a little bit of steepness in the yield curve, that actually promotes lending. I do believe portfolios will continue to perform extremely well because of stability in the labor market. We’re actually getting some wage increases, which I think will be better in 2017 than they were in 2016. That’s a very positive thing for portfolio performance. When those loans are securitized, I think they’ll still offer investors a very nice risk-adjusted reward; therefore money will flow.

“Overall I’m looking at it to be a positive market this year,” Webb went on to say.

Dealers evidently agree with Webb as KeyBanc’s survey showed the upbeat sentiment for performance of their used-vehicle departments.

“Used-car trends remain favorable as used-car gross per unit appears to have bottomed out as an average of 60 percent of respondents reported an increase of more than $50 in the quarter,” KeyBanc said.

“And we believe we are approaching a near-term inflection point based on our used-car gross per unit index trend, in part driven by easing year-over-year comparisons,” the company added.

While not mentioned in the KeyBanc report, Webb briefly touched on another part of the dealership operation that has to do with financing. While not giving a specific figure, Webb said the impact of an uptick in interest rates likely means the cost of a dealer’s floor plan is likely to edge higher, as well.

“Most dealers do a very good job of following the velocity theory. They do maintain that inventory turn so it shouldn’t be a major burden,” Webb said. “It would only be a burden for those dealers who have not caught up to the fact that you really do have to turn your inventory.”

4 parts of EFG Companies’ ‘murky’ F&I forecast


Formed through thousands of conversations with the nation’s leading dealership principals and finance companies, EFG Companies finalized four predictions and recommendations for 2017.

President and chief executive officer John Pappanastos summarized the results on Tuesday, saying these insights reflect an air of cautiousness for the F&I market.

But Pappanastos added there are many options for the industry to successfully navigate an uncertain business climate for a prosperous year.

“Even though the election is over, we continue to see a murky forecast for the F&I market moving forward,” Pappanastos said. “Consumers clearly want a new — and at least partially online-buying process. This trend has significant impact for the F&I industry across retail and lending channels.

“We also expect to see credit tightening on the consumer side and a foreshadowing of reduced auto manufacturer incentives for dealers, which will impact their margins,” he continued.

“Finally, we don’t believe federal regulatory oversight will diminish to the level that is being hyped. So, we strongly believe compliance will continue to challenge dealers and lenders,” Pappanastos went on to say.

“All that being said, we believe that the changes transforming the auto industry will create unique opportunities for dealers and lenders to leverage as they look to expand their business,” he added.

Four other executives from EFG Companies elaborated about the thoughts Pappanastos mentioned.

1. Flat volumes, compliance, and customer retention for retail automotive

While Consumer Financial Protection Bureau (CFPB) authority may be up in the air, John Stephens, executive vice president of dealer services, noted that dealers will need to stay the course on compliance for 2017.

“Remember, the Federal Trade Commission (FTC) has jurisdiction over dealers and its operations are not impacted by any potential changes within the CFPB,” Stephens said.

“Analysts are predicting flat unit sales volumes, pushing dealers to maximize their investment by squeezing more profitability out of their F&I operations,” he continued. “Customer retention efforts will increase, prompting dealers to shore up their service drive and fixed operations to deliver the ‘luxury car’ level of service.

In addition, an influx of off-lease vehicles will increase used-car inventory while putting pressure on pricing. Whether purchasing new or used, the customer will be king in 2017,” Stephens went on to say.

2. Return on investment and shorter transaction times key for F&I agents 

With dealerships feeling increased pressure, Adam Ouart, vice president of agency services, projected that F&I agents will also experience a trickle-down effect to clearly demonstrate a return on investment for the F&I products they place at a dealership.

“Agents will also feel pressure to help dealers shorten transaction time and pivot their operations to support online transactions,” Ouart said. “Agents will closely monitor their own businesses to keep production levels high and begin focusing more on acquiring new dealership business. “

3. Rising interest rates and portfolio evaluations will challenge finance companies  

Regardless of what happens with the CFPB, Brien Joyce, vice president of specialty services, said finance companies will also need to stay the course.

“You don’t stop treating customers right on the off chance that the government might not see your good behavior,” Joyce said. “Increasing interest rates will pressure lenders to tighten lending standards and evaluate other options to protect their loan portfolio outside of APR and loan terms. The same can be said for credit unions and other lenders that offer auto loans directly to consumers.

“I expect more lenders to evaluate how consumer protection products can benefit them from the standpoint of differentiating their institutions from the competition, protecting their loan portfolio, increasing loan volume, and controlling compliance,” he continued.

“In addition, dealers will re-evaluate their lender roster, confirming a broad spectrum of partners that specialize in different credit tiers, and help dealers meet their profitability goals,” Joyce added. “This will put pressure on lenders to evaluate their service model for dealerships and make adjustments to tackle mutual dealer and lender challenges.”

4. Growth and finance company challenges continue for powersports dealers 

Although unit sales fell in the second half of 2016, Glenice Wilder, vice president of powersports, is anticipating volume will pick up in February when early income tax refunds arrive.

“There will be a slight growth in the powersports market overall in 2017 with dealers putting greater emphasis on increasing aftermarket income through the sale of F&I products,” Wilder said. “Lenders that remain in the powersports market will want to insulate their loans and may look to offering their own complimentary F&I products.

“As powersports dealers continue to be starved for lenders, up-to-date technology resources, and committed employees, they will pressure their vendors and product administrators to provide outside the box solutions for these obstacles, such as digital F&I services,” Wilder added.

Equifax unveils 3 product integrations with 3 other solution providers


During last week’s industry festivities in the Big Easy, Equifax rolled out solution enhancements with a trio of other service providers — Fiserv, Digital Matrix Systems and Dominion Dealer Solutions.

First, Equifax and financial services technology solutions Fiserv collaborated on an interface between The Work Number provided by Equifax Workforce Solutions and Fiserv's Automotive Loan Origination System. Together, the companies said the solutions can provide faster and more robust income and employment verifications to customers. 

Refreshed each pay period, Equifax claims The Work Number is the largest database of income and employment information provided directly from employers and includes records from more than 75 percent of the Fortune 500 companies, including an increasing number of medium-to small-sized employers.

“Fiserv has chosen our income and employment verification solution because it provides instant access to data that can help its customers close deals faster,” said Scott Collins, senior vice president Verification Services at Equifax Workforce Solutions. 

“These clients are already using our traditional credit and commercial data and this enhancement will provide a deeper view of a consumer's credit profile and provide a tremendous value to their overall underwriting process,” Collins continued.

Fiserv is one of the industry’s top providers of auto loan origination and servicing systems, completing upwards of 5 million originations on 18 million credit applications on its Automotive Loan Origination System last year alone. The connection to the Equifax database can allow finance companies to secure income and employment data in seconds and help approve applications quicker and limit stipulations.

Charles Sutherland, vice president of product management and strategy within lending solutions at Fiserv, said of the integration, “After surveying the market for a proven partner, it became evident that The Work Number met all of our success criteria.

“Together, these two applications aim to improve the speed and accuracy of consumer originations,” Sutherland continued.

Integration into Digital Matrix Systems

In other company news associated The Work Number, Equifax announced that Digital Matrix Systems (DMS), a leading risk management solution provider, has established connectivity to the credit bureau’s tool to provide income and employment verifications to DMS clients.

Both operations insisted that verifying income and employment can allow finance companies to minimize exposure to fraud.  They continued that leveraging data from third-party sources for proof of income can streamline the overall process, resulting in improved efficiency. 

Access to The Work Number data will be available through Data Access Point by DMS, a connectivity hub that can offers clients flexibility when using both traditional and alternative data sources.

“We continually survey the market and work with our partners to evaluate new data sources for our clients, and the addition of The Work Number will allow us to provide access to a unique and beneficial data set,” said David Graves, DMS executive vice president. 

“DMS and Equifax share a mutual goal — to improve the speed and accuracy of consumer originations,” Graves continued.

Equifax’s Collins added, “Our income and employment verification solution rounds out the DMS offering by enabling instant access to data that can help their clients reach business decisions faster.

“Being in a position to have a more comprehensive view of a consumer's credit profile will help give these lenders greater confidence around credit risk and their customers’ ability to repay,” he went on to say.

Equifax highlights service lane equity mining capability

Furthermore, Equifax also launched availability of PowerLead Offer — a new soft-pull credit-based solution designed for the dealership service lane — that can prescreen customers for potential vehicle financing offers.

John Giamalvo, vice president of dealer services at Equifax, explained that instances where a customer brings a vehicle to the dealership for maintenance or repairs present a unique opportunity to prescreen for additional sales opportunities. Giamalvo noted that PowerLead Offer can enable a service provider to prescreen the customer, either prior to their arrival or on-the-spot, to assess eligibility and terms for a new car firm offer of credit.

When the consumer qualifies, a firm offer of credit can be provided to the customer during the vehicle servicing experience.

“A face-to-face encounter with a customer is a sales conversion opportunity and the introduction of a qualified offer enables the dealership to better maximize every customer touchpoint, even outside the showroom,” Giamalvo said

Dominion Dealer Solutions, a provider of web-based customer relationship management and dealer management system technology, was the first within the industry to adopt PowerLead Offer. The company will leverage the solution as an enhancement to its equity mining platform DealActivator to help increase the unique value it provides to its dealer customers.

“This integration will keep our dealers compliant and their customer’s information secure, while helping to significantly increase the dealers’ equity opportunities in the service lane,” said Alan Andreu, general manager of equity solutions for Dominion Dealer Solutions.

“I am excited that DealActivator can directly offer dealers soft credit pulls with the largest credit provider in the country,” Andreu went on to say.

RouteOne advances 2 platforms to boost mobile capabilities


RouteOne unveiled a pair of solutions aimed at helping dealerships and finance companies complete vehicle deliveries and documents in the showroom or wherever the purchaser might be.

On Monday, RouteOne launched remote document delivery; what the company explained is a new technology that can securely and compliantly give consumers electronic access to their eContracted documents. At the same time, the tool can reduce printing costs and paper shuffling for dealers.

Paradoxically, RouteOne acknowledged the eContracting process still involves paper, and can result in printed review and signed copies of retail and lease contracts. The company noted paper has remained part of the process, in part, because of compliance requirements surrounding providing consumers with copies of their contracts that they can take with them. Previously, the only way to accomplish this requirement was the paper option.

With RouteOne’s remote document delivery technology, the company explained the need to print review and final copies of retail and lease contracts is alleviated.

Now with a click of a button and the consumer’s email address, dealers can send their customers a secure link to access their files.

As an option, customers can review the documents in the dealership on their own smartphone or tablet. They can also log in at home to review, save or print them for later reference.

“We listened, we heard and we responded,” RouteOne chief executive officer Justin Oesterle said. “Our dealers told us they love eContracting, but they wanted less paper. Remote document delivery came from listening to our customers.

“We often refer to RouteOne as the company that is ‘designed by dealers for dealers’, and this is a great example of how we strive to make that happen,” Oesterle continued.

The new technology, led by Toyota Financial Services and Ford Motor Credit, is now available functionality for RouteOne eContracting. As part of RouteOne’s commitment to making eContracting better and better, it is provided at no charge.

In the future, the company added the documents available in remote document delivery will continue to expand as RouteOne continues to advance eContracting.

Details of RouteOne’s new digital retail platform

Meanwhile, RouteOne highlighted its new digital retail services can provide dealerships with an online credit application containing dealer-selected branding along with a mobile point of sale application to accommodate consumers’ growing demands for a seamless transition to, and greater flexibility within, the in-store vehicle purchasing process.

RouteOne wanted to give dealers this easy-to-use technology, allowing their customers to complete a credit application themselves or as guided by the dealer. This process can occur online from the dealer’s website, in the dealer’s showroom, or wherever a deal may happen — from any mobile device.

The mobile point of sale app included in RouteOne’s digital retail services, not only can provide flexibility, but also enables consumers to eSign the credit application. Compliance features, including credit score disclosure notice, privacy policy and identity verification, can be automated for every online application to assist dealers in managing their regulatory requirements.

RouteOne chief strategy officer Todd Mason pointed out that dealers who have made the shift have found that RouteOne’s digital retail services can reduce errors and missing information, which can expedite the deal funding process. The information captured in the online credit application can flow directly into a RouteOne eContract, creating a seamless, digital F&I experience.

“Providing dealers with the ability to conduct business online is not new territory for RouteOne,” Mason said. “However, as the consumer’s journey changes and business models evolve, so will our technology.

“This new digital retail platform responds to the growing need for greater flexibility within the vehicle purchasing process,” he went on to say.

To learn more about RouteOne’s new tool, visit routeone.com/dealers/digital-retail-services.

6 features of Black Book’s new Visual Analytics


Whether it’s during an industry-wide conference or in one-on-one client sessions, finance companies often pepper Anil Goyal with questions. The senior vice president of automotive valuation and analytics for Black Book mentioned some common ones such as, “Can you tell me why this segment is performing well? Why not? Where is the supply or demand? Can you tell me how the segment has performed in the past five years?”

To provide finance companies more opportunities to ask those questions — and perhaps more importantly receive what Black Book considers to be reliable answers — the company introduced Visual Analytics, a subscription-based interactive data solution that can enable users to easily unearth and gain insights on outcomes leveraging historical, current and projected vehicle and segment valuation data.

SubPrime Auto Finance News joined the stream of posing questions to Goyal, who shared a demonstration of Visual Analytics during this week’s Vehicle Finance Conference in New Orleans hosted by the American Financial Services Association. Goyal showed how the browser-based application produces information through a dashboard presentation.

The tool can offer metrics going back nearly two decades as well as Black Book projections that look ahead for the next couple of years.

“My excitement is more about leveraging this tool to help deliver insights and inform lenders on where the trends are going to help them make better decisions,” Goyal said. “What’s happened in the last five years, we’ve had such a strong market both in terms of lower delinquencies along with growth and demand coming up and retail values being so strong. It’s all been very positive.

“Now some of those positive trends are turning,” he continued. “Delinquencies are rising and vehicle values are going down. Pent-up demand has been spent. There are more plateauing of those positive trends as some of the negative trends are starting to creep in. That means you need to make smarter decisions. Just being in the business is not enough. You’ve got to get ahead of that competition. You have to understand what your data is saying. You have to know where you can fine-tune your portfolio. That’s where the value comes in.

“Five years ago, it might not have been that relevant because everyone was winning. But data analysis and visually delivering it have been more and more critical for some to say, ‘I get it,’” Goyal went on to say.

Here are six of Visual Analytics’ capabilities and features designed for auto finance company managers and other industry professionals to “get it,” including:

• Realize in-depth market trend analysis to see a holistic picture of the used-vehicle market and see where collateral values are trending historically and current day.

• Detailed residual value projections that offer visibility and forecasting from a predictive modeling approach on individual vehicle models and ranking within segments on where collateral trends are projected to go.

• Gain insight to help fine-tune loss forecasting so that lenders can minimize and mitigate potential loss resulting from falling values and delinquency rates.

• Identify new and emerging opportunities based on collateral trends that show growth potential across each of the vehicle segments, opening up avenues for segment growth in portfolios.

• Understand depreciation trends that are critical to healthy and profitable portfolio growth.

• Explore robust data based on the Black Book’s accurate valuations data.

“If you’re looking for something in this space, we have all of the information right here for you,” Goyal said. “These are the kinds of insights where you would have to get a lot of data and an analyst. There’s a lot of talk about data analytics, but it requires a lot of effort, too. We want to simplify analytics like this and make it available to our lending customers.”

Finance company clients also can upload data to Black Book — sets that do not include personal customer information — and Visual Analytics can run various reports about that credit provider’s portfolio. Goyal highlighted the tool can determine how much exposure a portfolio has to certain segments and even specific models that have gone through various changes involving demand, depreciation and more.

“These insights will really help them understand what’s going on in the market, the history and where it might be going,” Goyal said.

To schedule a demo of Visual Analytics, or to learn more about the solution, visit blackbook.com/solutions/visual-analytics.

AutoGravity mobile financing platform now available in 46 states

IRVINE, Calif. - 

Within weeks of reaching a partnership with a subprime auto finance company, AutoGravity — a FinTech developer on a mission to transform auto financing by harnessing the power of the smartphone — announced on Wednesday that potential buyers in 46 states can obtain up to four financing offers on any make, model or trim of new or used vehicle.

Shoppers can receive their offers through four steps on the AutoGravity platform, which can return personalized retail installment contract and lease offers within minutes.

“AutoGravity has brought car finance into the digital age,” said Andy Hinrichs, who became AutoGravity’s founder and chief executive officer after decades as an auto finance executive.

“Our industry-leading technology has been embraced by top banks and captive auto lenders, as well as leading dealer groups who see customers shopping on their smartphones every day,” Hinrichs continued in a news release. “We’ve re-designed the car finance experience, taking it from hours to minutes for car buyers across the country.”

Earlier this month, the firm finalized a partnership with First Investors Financial Services, bringing the subprime auto finance company’s indirect financing business onto the AutoGravity platform.

Based in Irvine, Calif., AutoGravity said it has built other partnerships with the world’s leading banks, captive finance companies and leading dealership groups. As a result, AutoGravity claims to be the only company to successfully bring thousands of dealers and an extensive list of top global finance companies together in a single, convenient digital marketplace.

“To truly empower car buyers with access to every possible vehicle, dealer and finance choice, the AutoGravity platform must be an attractive place for lenders and dealers to do business,” said Serge Vartanov, AutoGravity’s chief marketing officer.

“We’ve spent over a year integrating lenders and dealers into the platform, and we’re now ready for customers across the country to start shopping and financing —making AutoGravity a game-changer in the auto-finance industry,” Vartanov continued.

The app can guide vehicle shoppers through an intuitive four step process:

1. Select any make, model and trim of new or used vehicle available in the United States.

2. Select any dealership from AutoGravity’s proprietary national database; the platform automatically pinpoints the location and shows the closest dealers selling the vehicle.

3. Search for financing for the selected vehicle on a smartphone. Users can scan their driver’s license and connect to social media to quickly pre-fill the finance application.

4. Receive up to four finance offers within minutes. They can select the retail installment contract or lease offer that’s right and head to the dealership to complete the delivery.

“AutoGravity’s highly-streamlined process is designed to address the shopping habits and demands of modern consumers, particularly millennials,” the company said. “This is made possible through AutoGravity’s unparalleled technical expertise, partnerships with the world’s most prominent lenders and a proprietary database of trusted dealerships.

Designed with state-of-the-art security, AutoGravity protects consumers’ information with advanced bank-level encryption and proprietary data security technologies, ensuring sensitive information is processed in a safe and secure way,” the company went on to say.

The app is available for download on from the Apple App Store and from Google Play. AutoGravity is also available as a mobile-responsive web-app at www.autogravity.com

3 credit bureaus rebut subprime ‘bubble’ talk again to open AFSA event


The American Financial Services Association made the decision not long before the holidays to add another special panel discussion to its Vehicle Finance Conference; a segment dedicated solely to the subprime segment and to assuage concerns of a “bubble.”

In front of a standing-room only audience at the Sheraton New Orleans, a trio of experts from each of the three major credit bureaus to varying degrees all emphasized that there is no bubble, and the amount of subprime auto paper still outstanding is actually less than where it stood before the Great Recession.

AFSA gathered together Equifax chief economist Amy Crews Cutts, Experian senior director of automotive finance Melinda Zabritski and Jason Laky — who is senior vice president and automotive and consumer lending business leader at TransUnion — for a session ahead of the main festivities at the conference that began later on Tuesday.

Each of the experts took turns dissecting various parts of the subprime auto finance market, maintaining that it’s not “bubbling” like some media outlets might speculate while circling back to the mortgage meltdown that derailed the economy.

“People don’t buy cars to flip them. They buy them to get to work,” Crews Cutts said. “There’s definitely not a bubble.”

Later Laky added, “It’s such a different part of the economy than mortgage.” And when speaking about subprime auto paper being booked nowadays, Laky said, “We’re still not even up to where we were back in 2009.”

Zabritski also chimed in, saying, “We had this massive trough in 2009 where there wasn’t any funds to lend. We’re seeing the market turn around with higher scores in longer term loans.”

The 45-minute session moved quickly as the assembled panel touched on elements of the subprime space that are now different than perhaps 10 years ago, especially with the advent of alternative credit data that can present a more detailed background about a consumer’s past performance.

However, each credit bureau shared some concerns about subprime auto finance.

Laky mentioned that terms stretched to 75 months are fine, if the consumer actually has the budget capacity to maintain the payment commitments.

Zabritski noted that loan-to-value ratios often are at 110 percent and higher, even when a buyer makes a 10-percent down payment. That’s because of all of the taxes, fees and other ancillary costs that go into delivery.

Crews Cutts pointed out how it’s important to watch trend data about payment performance of subprime borrowers with regard to all of their monthly commitments because sometimes their ability to handle their finances can produce a “train wreck.”

Editor’s note: Much more coverage from the discussions and presentations during AFSA’s Vehicle Finance Conference will be included in upcoming reports from SubPrime Auto Finance News.

AFSA describes ‘glue’ that holds industry together


While the American Financial Services Association firmly is entrenched within the Capitol Beltway in Washington, D.C., the organization strives to represent the entire industry, not just a select group of players. AFSA president and chief executive officer Chris Stinebert reinforced that reasoning when describing the AFSA Vehicle Finance Board.

Stinebert said that board “features a broad cross section of companies: banks, captive finance companies and independent finance companies. Each member uses the indirect channel to finance new and used cars, trucks and motorcycles — meaning they purchase the loans from dealers and do not make auto loans directly to consumers.

“Indirect lending has proven to be the most cost effective and convenient way for consumers to finance a vehicle,” he continued. “Although each company competes fiercely for business, they all have common interests and concerns. This is the glue that binds.”

Those fierce competitors will be gathering together this week in New Orleans as AFSA hosts its annual Vehicle Finance Conference beginning. As usual, the gathering of auto finance company executives, legal experts and other service providers comes just ahead of the National Automobile Dealers Association Convention and Expo, also being conducted in the Big Easy.

“We have a wonderful working relationship with NADA,” said Stinebert, who again incorporated NADA leadership into the Vehicle Finance Conference program.

“Our relationship with NADA has been so productive because we look at the industry from the consumer’s point of view,” he continued. “We’re really talking about the same transaction.

“Both of our organizations represent members who have the same responsibility — to provide consumers with a smooth, transparent, and easy-to-understand vehicle purchase and financing process,” Stinebert added.

This year’s conference theme asks the provocative question, “Are we there yet?”

Stinebert said, “Our theme may remind you of a long road trip with your kids and sounds a bit odd. But it raises an extraordinarily important question. It provokes our members to ask themselves if their companies are 'there yet' on issues like compliance, cyber security, customer satisfaction and technology.

“We’re attempting to answer that question — sessions are focused on giving our members the tools and knowledge to make that journey,” he continued.

Josh Linker, an entrepreneur and hyper-growth CEO who has spent his career harnessing the power of disruptive change, will present the conference keynote. He will deliver a clear call to action for members — it is better to innovate and disrupt your organization before your competition does. The riskiest move companies can make today is embracing the status quo — believing the future will be like the past is the fast road to obsolescence.

Another important session will feature the three major credit bureaus coming together “to set the record straight” on the health of the subprime auto finance market. The experts scheduled to be a part of that discussion are:

— Denise Brown, chief risk officer Veritas Auto Finance and chair of the AFSA Vehicle Credit Risk Committee.

— Amy Crews Cutts, senior vice president and chief economist at Equifax Automotive Services

— Jason Laky, senior vice president and auto business lead atTransUnion

— Melinda Zabritski, senior director at Experian

David Paul (Vehicle Finance Division chair and senior vice president, financial services at American Honda Finance Corp.) and Mark Scarpelli (incoming NADA chairman and President of Raymond Chevrolet and Kia) will kick off the final day of the conference with a frank discussion about the important relationship between dealers and financing sources.

AFSA’s CEO Panel will feature key industry executives sharing best practices, compliance hurdles, and critical opportunities in the fast-moving marketplace of auto finance. That executive group is set to include:

— Jason Grubb, chief executive officer at Exeter Finance Corp.

— Dale Jones, executive vice president, Americas with Ford Motor Credit

— Mark O’Donovan, chief executive officer of Chase Auto Finance

— Vince Rice, executive vice president and consumer finance division head with Bank of the West

Organizers highlighted registration for the conference has grown steadily over the last decade. AFSA added that attendance at the 2017 conference has set a new record as more than 600 attendees will gather in The Big Easy to network, learn from the experts, and visit the conference’s more than 55 exhibitors.

Not only collaborating for this annual event, Stinebert touched on how else AFSA and NADA are working together so the financing of vehicle transactions goes well for all parties involved.

“One of AFSA’s core competencies is to educate politicians, regulators and most importantly, consumers, about the benefits of the auto financing process and the industry,” Stinebert said.

“This past year, in conjunction with the Federal Trade Commission and NADA, AFSA updated the Understanding Vehicle Financing brochure. This publication is a must read for anyone who wants to finance a car, including regulators and politicians,” he continued.

“Today, more than ever, consumers are going online to not only research certain vehicles in certain segments, but also to research the best way to finance and pay for their vehicles,” Stinebert went on to say. “In addition to constant dialogue with Capitol Hill staffs and regulators, this year AFSA and NADA are updating and modernizing the website for AWARE, an acronym for Americans Well-informed on Automobile Retailing Economics. This is a joint project shared by the two trade associations and their members. It is devoted to educating consumers about auto financing.”

As the industry descends into New Orleans, Stinebert shared his assessment of how the auto finance market behaved in 2016.

“We entered the year with concerns about The New York Times editorial on the pending subprime auto bubble and we ended 2016 with a huge sigh of relief,” he said. “Instead of disaster, we have enjoyed a very successful year of record sales.

“More importantly, the credit bureaus recently reported improved data on average credit scores and delinquencies, so no bubble and no crisis,” Stinebert continued. “This does not mean, however, we do not have many challenges going forward. But the looming regulatory and compliance issues facing the used-car market should see promised relief with the election of Donald Trump.”

Editor's note: Watch for updates from the Vehicle Finance Conference on our website as well as our Twitter feed at @SubPrimeNews.