Black Book isn’t just pitching its products and services to finance companies nowadays. Its analysts and staff are trying to emphasize to executives and managers who watch loan-to-value ratios and overall portfolio status about how much risk is building and how important it is to watch how long it will take for a borrower to return to an equity position.
In light of Experian Automotive highlighting second-quarter data that showed 24.1 percent of all new-vehicle loans and 14.1 percent of all used-car contracts contained terms ranging from 73 to 84 months, Black Book took a closer look at comparative collateral data in order to drill deeper into this trend. The company recently leveraged its Collateral Insight Engine technology to compare two different vehicles based on the exact loan terms of 72 months, 5-percent interest and a 120 percent loan-to-value ratio.
Based on the data from the example, Black Book indicated one vehicle achieved a positive equity position in just 37 months, a whole 15 months earlier than the other vehicle (at 52 months).
What’s more, the first vehicle had approximately $3,000 more equity by the 24th month versus that of the second.
Black Book vice president of analytics Anil Goyal explained to SubPrime Auto Finance News during a recent phone interview that knowing the potential loss-given default provides the ability for finance companies to become more competitive with their portfolios while mitigating risk.
Additionally, Goyal pointed out that positive equity will pinpoint those loans that are less likely to default, giving finance companies yet one more data point to differentiate two loans that look otherwise identical.
“As trends have emerged in the lender community, this risk is even more heightened with longer terms,” he said. “You’ve got to have an analysis on when that vehicle is going to come into an equity position. The longer it takes, the longer you’re exposed to market conditions where the trends could change and the vehicle depreciates much faster.”
Goyal emphasized the two aspects when finance companies assess risk. The first is the frequency of default, “which is really indicated by the credit score and you can factor that into your price and get paid for that risk,” according to Goyal.
The other element he mentioned is severity of default.
“When someone doesn’t pay,” Goyal said, “what’s the equity on that loan? How much balance is remaining? What can you recover out of that when you repossess that vehicle?”
Goyal stressed that these two risk-assessment factors are heightening nowadays because of finance companies stretching terms.
“Basically the lenders are trying to provide that monthly payment that the customer can afford,” said Goyal, who joined Black Book in a full-time role back in July after serving in a variety of consulting functions for the firm along with positions at Bank of America and Citigroup.
“But the key risk that’s evolved in this is that you’re going to be underwater for a longer period of time because the equity takes much longer to build up,” he continued. “Meanwhile, you’re having this addition trend of vehicle values softening and getting more toward the pre-recession time frame. You’ve got this double whammy. You’ve got the equity under water and not building as quickly and at the time vehicle values depreciating more.”
During the recent interview, Goyal offered another hypothetical example with some figures involved. He explained that with a typical 36-month loan, a borrower will have paid about 30 percent of that principle balance in a year. If the term is 84 months, the borrower only paid down about 10 percent of that principle balance following a year of payments.
“If the value depreciated anywhere from 25 to 45 percent from that original retail price to that wholesale value in that 12-month period, you’re significantly underwater with that 84-month loan,” Goyal said. “That’s why we think it’s so important to monitor that and put that into your analysis as a lender to make sure you are appropriately accounting for that risk up front as well as in your portfolio evaluation.”
Yet another piece of the puzzle to consider: The kind of vehicle that’s being attached to the contract. Goyal noted that currently values of compact pickups and SUVs are holding strong. A couple of years ago, it was entry-level cars that held that distinction, but Goyal indicated that values for those kinds of units are softening because the supply of those vehicles is on the rise.
Goyal closed his conversation by mentioning that watching the portfolio isn’t just an important chore for the underwriting and recovery departments at finance companies. He stated it’s also important for marketing divisions to watch these trends, too, so they can approach current loan holders with new opportunities if they currently are in a positive equity position.
“We are able to tell lenders when a loan is going to be in an equity position, how long is it going to take to get there and for lenders to be able to account for that throughout the life cycle as well as what’s my portfolio looking like and how does that impact loss forecasting,” Goyal said.
“We are constantly watching these trends,” he continued. “But as the market evolves these trends will change. That’s what we emphasize monitoring your portfolio is very important from a collateral viewpoint,” he added.
Both Credit Acceptance Corp. and Consumer Portfolio Services made financial announcements this week; one a tender offer to purchase its own shares of common stock and the other the closing of its third term securitization of the year.
Starting with Credit Acceptance, the company commenced a tender offer to purchase up to 995,698 shares of its outstanding common stock at a price of $125.54 per share.
“We anticipate that we will obtain all of the funds necessary to purchase shares tendered in the tender offer, and to pay related fees and expenses, by borrowing under our revolving secured line of credit facility and/or one or more of our revolving secured warehouse facilities,” Credit Acceptance officials said. “The tender offer is not conditioned upon the receipt of financing.”
The company indicated it evaluated operations, strategy and expectations for the future.
“We believed that the tender offer is a prudent use of our financial resources given our business profile, assets and the current market price for our shares,” Credit Acceptance said.
As of Monday, the company determined that it had $429.5 million in unused and available capacity on its revolving secured line of credit facility and revolving secured warehouse facilities.
“We believe that the tender offer represents a mechanism to provide all shareholders with the opportunity to tender all or a portion of their shares and, thereby, receive a return of the company's capital if they so elect,” officials said. “This format of repurchase also provides a method for shareholders not participating to increase their relative percentage interest in Credit Acceptance and our future operations at no additional cost.
“As a result, we believe that investing in our own shares in this manner is an attractive use of capital and an efficient means to provide value to shareholders,” they continued. “The tender offer also provides liquidity to shareholders (particularly those with large shareholdings) by providing them the opportunity to sell all or a portion of their shares at a price of $125.54 per share without potential disruption to the share price and the usual transaction costs associated with market sales.”
Credit Acceptance pointed out the tender offer will expire at 5 p.m. ET on Oct. 20, unless extended by the company.
The company pointed out tenders of shares must be made on or prior to the expiration of the tender offer and shares may be withdrawn at any time on or prior to the expiration of the tender offer.
“Our obligation to purchase shares in the tender offer is not conditioned upon any minimum number of shares being tendered,” officials said. “The tender offer is, however, subject to the conditions set forth in the Offer to Purchase and related Letter of Transmittal documents being sent to shareholders.
Under the tender offer, shareholders of Credit Acceptance common stock are invited to choose how many shares they are willing to sell to the company at $125.54 per share.
If more than the maximum number of shares sought is tendered, Credit Acceptance explained that tendering shareholders owning fewer than 100 shares, or “odd lot” holders, will have their shares purchased without proration and all other tendered shares will be purchased on a pro rata basis, subject to the conditional tender provisions described in the Offer to Purchase.
The company added that shareholders whose shares are purchased in the tender offer will be paid the purchase price net in cash, without interest, promptly after the expiration of the tender offer. Shareholders whose shares are not purchased in the tender offer will have their shares returned, free of charge, promptly after the expiration of the tender offer, according to the company.
Credit Acceptance chairman Donald Foss has indicated his nonbinding intention to tender 4.0 million shares in the tender offer. Glenda Flanagan, one of the companay’s directors, has revealed that she may tender up to 25,000 shares in the tender offer.
The company said none of its other directors or officers have indicated their intention to tender shares in the tender offer.
As of Sept. 1, Credit Acceptance had 21,593,588 shares outstanding. The last reported sale price of Credit Acceptance's common stock on the NASDAQ Global Select Market on Thursday, which was the last trading day prior to the announcing of the offer, was $125.54 per share.
CPS Makes $273 Million Senior Subordinate Asset-Backed Securitization
In other industry news, Consumer Portfolio Services announced the closing of its third term securitization of the year. The transaction is CPS’ 14th senior subordinate securitization since the beginning of 2011 and the second consecutive securitization to receive a triple A rating on the senior class of notes.
In the transaction, CPS highlighted, qualified institutional buyers purchased $273 million of asset-backed notes secured by automobile receivables purchased by the company.
The sold notes, issued by CPS Auto Receivables Trust 2014-C, consist of five classes. Ratings of the notes were provided by Standard & Poor's and DBRS and were based on the structure of the transaction, the historical performance of similar receivables and CPS's experience as a servicer.
| Note Class |
Amount |
Interest
Rate |
Average
Life |
Price |
S&P
Rating |
DBRS
Rating |
| A |
$187.0 million |
1.31% |
1.25 years |
99.99826% |
AA- |
AAA |
| B |
$36.2 million |
2.67% |
3.01 years |
99.98544% |
A |
A |
| C |
$28.7 million |
3.77% |
3.70 years |
99.98894% |
BBB |
BBB |
| D |
$13.7 million |
4.83% |
4.08 years |
99.96335% |
BB |
BB |
| E |
$7.5 million |
5.91% |
4.08 years |
99.97978% |
B+ |
B |
Officials indicated the weighted average effective coupon on the notes is approximately 2.71 percent.
CPS noted the 2014-C transaction has initial credit enhancement consisting of a cash deposit equal to 1.00 percent of the original receivable pool balance. The company pointed out the final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 4.00% of the then-outstanding receivable pool balance.
Furthermore, officials highlighted the transaction utilizes a pre-funding structure, in which CPS sold approximately $185.2 million of receivables this week and plans to sell approximately $87.8 million of additional receivables during October. This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of September.
“The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law,” CPS said. “All of such securities having been sold, this announcement of their sale appears as a matter of record only.”
Reynolds and Reynolds this week launched of the Reynolds LAW Ohio F&I Library, a comprehensive catalog of standardized, legally reviewed finance and insurance documents available to dealers in the Buckeye State.
Officials highlighted the Reynolds LAW brand library of forms was developed jointly through a partnership between Reynolds Document Services and the Ohio Automobile Dealers Association (OADA).
"After partnering recently with a number of other state and regional dealer associations in the creation of LAW forms libraries, Reynolds is pleased to partner with the OADA in the same venture," said Jerry Kirwan, senior vice president and general manager of Reynolds Document Services.
“The OADA and our other dealer association partners understand a LAW forms library can support a comprehensive retail management approach for dealers and can help dealers improve the car-buying experience for their customers,” Kirwan continued.
Kirwan insisted changing regulations for automobile dealers have increased the pressure to improve dealers' F&I operations. As a result, he noted dealers are seeking trusted ways to help their business meet current compliancy standards, improve efficiency and lower risk, and stay up-to-date with customer service trends.
The LAW Ohio F&I Library of documents was created and will be maintained by the combined expertise of Reynolds director of compliance Terry O'Loughlin, Reynolds’ AFIP certified compliance legal specialists and the OADA.
"The creation of the Ohio LAW library aligns with our interests of providing our members with credible ways to improve dealership operations, as well as improve the experience for their customers," said Tim Doran, president of the OADA. "We are pleased to partner with Reynolds in this endeavor."
Based in Dublin, Ohio, the OADA is a political, economic and educational association created for Ohio dealers, by Ohio dealers, and managed by Ohio dealers, with the mission to protect the interests and increase the value of automotive dealerships throughout the state. Visit the OADA online at www.oada.com.
Reynolds' LAW forms are available in all 50 states and Washington, D.C., and have been endorsed by a number of state automobile dealers associations and leading automotive finance institutions.
The flagship product of the LAW brand is the Reynolds LAW 553 Universal Retail Sale Contract. The Reynolds LAW 553 is available in a variety of languages and is regularly reviewed by industry experts to help keep pace with new legislative and regulatory developments.
Reynolds Document Services offers similar LAW brand forms libraries to dealers in a number of states, including California, Pennsylvania, West Virginia and Virginia.
Contained in this week’s announcement about Banco Santander entering into an agreement to acquire Canadian-based Carfinco Financial Group Inc. for $298 million (CDN) in cash is a stipulation about non-prime auto finance interests in the U.S.
As part of the deal expected to close in the fourth quarter of this year is a condition precedent to the closing of the arrangement — the divestiture of Carfinco’s wholly-owned and separately operated subsidiary Persian Acceptance Corp.
PAC is active in the U.S. in the non-prime vehicle financing segment through its head office in Wakefield, Mass. PAC has been an indirect auto finance company since 1998 and is currently licensed to finance contracts originated in Massachusetts, New Hampshire, Maine, Vermont and Connecticut.
Per the agreement terms and once the divestiture happens, each Carfinco shareholder will receive cash consideration of $11.25 for each common share of Carfinco representing total equity value.
Juan Rodriguez Inciarte, senior executive vice president and head of strategy at Santander, said: "We are excited to sign this agreement with Carfinco, which allows us to enter a market with good growth potential such as Canada, where we hope to reach agreements with other car manufacturers like those we have signed in other countries."
The cash consideration that Carfinco shareholders will receive under the arrangement represents a 32.12 percent premium to the 90-day volume-weighted average share price ending September 15, Carfinco reported.
Furthermore, Carfinco has also agreed to declare and pay a special dividend, which will be payable to shareholders of record on the closing date.
The company explained the amount of the special distribution will be determined closer to the closing date and is subject to necessary approvals.
"We are delighted with the value this all cash offer of $11.25 per share brings to our shareholders," said Tracy Graf, chief executive officer of Carfinco. "We look forward to becoming a division of Santander, one of the top banks in the world, and recognize the benefits their wealth of knowledge, experience and relationships in the auto finance industry will bring to the Canadian market."
Carfinco also shared it didn’t take the deal lightly.
The Carfinco board of directors formed a committee of independent directors “to review and evaluate the terms of the proposal from Santander and to oversee all aspects of the arrangement."
As part of the deal, certain executive officers of Carfinco, including the current president and CEO, the chief operating officer, the chief financial officer and vice president — account acquisition, will be re-investing a portion of their proceeds from the sale of their shares into the entity that will be acquiring Carfinco.
According to the companies’ statement, Graf and certain other key members of the management team will support Santander in the future growth of the company.
LightStream, a national online consumer lending division of SunTrust Bank became the exclusive online financing for Kelley Blue Book on Monday.
Officials highlighted the LightStream AnythingLoan can provide KBB.com site visitors with simple online financing that can be used for cars, trucks and motorcycles, anywhere in the United States.
“With LightStream, Kelley Blue Book now offers millions of car shoppers a seamless experience to apply for financing while they are researching their next vehicle on KBB.com,” said Damon Bennett, vice president of eCommerce and data syndication for Kelley Blue Book.
“Using LightStream, car shoppers can gain time and peace of mind moving forward with financing options directly on KBB.com in a smooth, convenient transition that gets them one step closer to owning their car of choice,” Bennett continued.
LightStream can provide unsecured vehicle financing to KBB.com visitors upon approval. Qualified consumers can borrow between $5,000 and $100,000 at terms of their choosing and at competitive fixed rates, starting as low as 1.99 percent APR with AutoPay for a new vehicle.
LightStream loan applicants can submit a short online form that only takes minutes to complete with little to no paperwork.
In addition, approved borrowers can have funds deposited directly into their bank account, as soon as the same day of application, if certain conditions are met.
“LightStream delivers financing at competitive rates through an entirely online, streamlined process,” said Gary Miller, business head of LightStream.
“Kelley Blue Book helps shoppers research their options and decide what they want to buy. Together, KBB.com and LightStream let consumers focus their time on finding the car they want, instead of worrying about its financing,” Miller went on to say.
Make it 13 quarters in a row during which the average amount consumers had remaining on their vehicle installment contract moved higher year-over-year.
TransUnion's Industry Insights Report indicated that auto loan debt per borrower jumped 4.1 percent from $16,410 in the second quarter of last year to $17,090 in Q2 of this year.
On a quarterly basis, TransUnion reported auto loan debt increased 1.35 percent from $16,862 in the first quarter. TransUnion automotive vice president Peter Turek pointed out that auto loan balances rose in every state year-over-year during the second quarter.
Among the biggest U.S. cities, Houston and Phoenix saw the largest yearly auto loan debt rises of approximately 6 percent. Houston's average auto loan debt increased to $21,690, the highest such number of all major markets.
“The numbers reflect a continued healthy marketplace,” Turek told SubPrime Auto Finance News this week. “There’s competition amongst the manufacturers, auto lenders and dealers. It’s great, healthy competition. I think in the end it benefits all of those stakeholders, especially consumers, the folks who drive those vehicles every day and make the payments.
“What we’re observing is the fact that there is more recent originations,” he continued. “As consumers over the past several quarters have demonstrated, auto sales have been booming and related financing has been booming so we have a lot more auto loans on the books that are recent that have higher balances. That’s what’s driving the higher average balance across all age groups and the industry.
“In addition, when you think about what was going on a couple of years ago, consumers were deleveraging so we were talking about how average balances were going down quarter-over-quarter,” Turek went on to say. “Now we’re in the 13th consecutive quarter where there has been an increase in auto loan debt. I would say that’s primarily from increasing auto sales and more, and more consumers buying automobiles and financing them.”
In a new view of the data, TransUnion also noticed that auto loan debt increases for different age groups remained in a tight range, though changes observed for borrowers ages 40 to 49 were noteworthy. These borrowers saw the largest yearly percentage increase — up more than 5 percent — while also having an average auto loan debt level nearly $1,000 higher than the next age group.
“We’re pleased to offer this slice of data. We think it gives some value around what consumers in different age groups are doing. It’s not really surprising. I think some of it is intuitive. When you think about the ages of people when they’re the most credit active is typically between ages 40 and 60,” Turek said.
TransUnion recorded 62.3 million auto loan accounts as of the second quarter, up from 58.2 million a year earlier. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 6.20 million in the first quarter of this year, up from 5.82 million in the same period last year.
Not Alarmed by Q2 Delinquency Uptick
Auto delinquencies rose slightly in the second quarter because there’s more paper on the streets nowadays, but TransUnion analysts don’t think the trends are necessarily bad for the industry.
According to TransUnion, the auto loan delinquency rate — the ratio of borrowers 60 days or more delinquent on their vehicle installment contracts — increased to 0.95 percent in Q2, up from 0.87 percent a year earlier.
However, TransUnion pointed out that auto delinquencies dropped on a quarterly basis from 1 percent in the first quarter of this year.
Turek explained that the latest delinquency rate remains below the Q2 average of 1.05 percent observed between 2007 and 2014.
Since 2007, Turek noted, the auto loan delinquency rate has reached as high as 1.59 percent (in Q4 2008), while its low was observed in Q2 2012 at 0.86 percent.
"Auto lending remains similar to what we have observed during the last several quarters,” Turek said. “Delinquency rates remain relatively low while auto loan balances keep rising — both metrics aided by increasing auto loan originations.
"In fact, there are 4 million more auto loan accounts in the marketplace than we observed just last year. This means with more auto loans in the marketplace and a delinquency rate ticking higher, we now have several thousand more delinquent accounts than at the midpoint of 2013,” Turek went on to say.
TransUnion indicated that all but six states experienced an increase in their auto loan delinquency rates between Q2 of last year and Q2 of this year. The largest delinquency increases occurred in Alaska, Michigan, Montana and Nebraska.
The largest declines occurred in Hawaii, South Dakota and Oregon.
The subprime delinquency rate (those consumers with a VantageScore 2.0 credit score lower than 641 on a scale of 501-990) increased from 4.12 percent in the second quarter of last year to 4.61 percent in Q2 of this year.
Turek also noted the share of non-prime, higher risk loan originations (with a VantageScore 2.0 credit score lower than 700) grew by 56 basis points (from 33.80 percent in Q1 2013 to 34.36 percent in Q1 2014). This percentage is still lower than what was observed seven years ago near the beginning of the recession (38.98 percent in Q1 2007).
Turek said observers should not read too much into the numbers because “4.61 percent of 1,000 is different than 4.61 percent of 1 million. I’m not suggesting it’s not a reason for concern. But I think when you think about the number of loans that are entering into 30-day delinquency, they’re not flowing through. Even though we still have a low delinquency rate overall, the number of new originations has certainly increased the frequency of delinquency. But we’re not seeing them translate into significant losses.
“As you look at that across the industry, you would interpret that as it’s pretty healthy. People are continuing to buy cars. They’re continuing to finance cars. It seems to be working right now, just in a very healthy way,” he continued.
"It will be interesting to see if lending to the subprime segment of the population continues to grow and what, if any, the impact will be on the overall delinquency rate,” Turek went on to say. “Historically, increased subprime lending pushes the overall delinquency rate higher. This is not necessarily a bad thing for the auto ecosystem — consumers find reliable transportation for work, lenders actively minimize the risk, and dealers sell more cars.”
Auto Finance: A Self-Managing Industry
SubPrime Auto Finance News also gathered Turek’s perspective on what’s been the talk of the summer — a perceived bubble inflating in connection with subprime vehicle financing. Like many other observers, Turek shook off thoughts that subprime auto finance is traveling down the same tracks as mortgages that derailed the economy into the Great Recession.
“When you think about what auto lenders do, they manage risk,” Turek said. “Where we are in the current business cycle we are seeing some tremendous growth since 2010 and 2011. Some of the growth is slowing so auto sales are slowing year-over-year. There’s going to be lenders that adjust where they buy to get more volume. There’s going to be more subprime lenders in the marketplace. And then there’s going to be consumers who feel more comfortable taking on a loan.
“When all of those factors combined come together in terms of the ecosystem, there’s going to be increases in delinquency. What we’re seeing is a return to this healthy competition. Delinquency is still, compared to other periods of time, really low, even in the subprime space,” he continued.
Turek also pointed to how finance companies cater their underwriting and analysis quite different between any auto or mortgage business it might conduct.
“Most of the time a vehicle is a shorter term piece of collateral. It’s not an appreciating asset. It’s a depreciating asset,” Turek said. “There’s a lot of that analysis that goes into the financing of that vehicle. It’s an interesting topic, but when you look at the numbers and peel them back, the industry has a way of self-managing itself when it comes to cost and things that impact the industry.
“When you look back at gas prices spiked, there were some lenders that had a lot of SUVs in their portfolio. They were able to account for those potential loan losses if one of those vehicles went bad because of gas prices or their values went sharply down,” he continued.
“Values and depreciation are priced into the loan,” Turek added. “I really don’t see that there is a subprime bubble. When you look at our data and delinquency, I think we’re returning to pretty healthy numbers.”
This past Saturday was a silver one for Hyundai Capital America as the captive finance company that does business as Hyundai Motor Finance and Kia Motors Finance celebrated its 25th anniversary and a quarter century in Orange County, Calif.
Originally formed as Hyundai Motor Finance Company in 1989, officials highlighted it was the fastest captive launch in U.S. history, achieving national coverage by the end of 1990.
While Hyundai Capital America has come a long way since its beginnings 25 years ago, including launching its Kia-branded financing label in 2004, officials insisted its impressive growth really occurred more recently.
By the end of 2005, Hyundai Capital America was a $1 billion company. Since then, it grew exponentially to more than 1 million customers and received its own investment-grade rating in 2012, and topped $20 billion in assets in 2013 — with half of that growth occurring in the preceding three years.
During that time, the company also opened two operations centers — one in Atlanta and one in Dallas — and expanded into its new headquarters building in Irvine, Calif.
According to the latest data from Experian Automotive, Hyundai Capital America ranked No. 12 among the top new-vehicle finance companies, holding 1.84 percent of the market.
As the company has grown in size, officials mentioned Hyundai Capital America has also significantly grown its functional expertise, offering career opportunities across 16 departments, including treasury, risk, credit and underwriting, sales, marketing, IT, and information protection functions.
Last year, the company launched a Hyundai-branded line of vehicle protection products, and this year lent its talent and expertise to help launch Hyundai Capital in Canada.
Hyundai Capital America employs more than 1,940 people nationwide (including temps and contractors), with 890 of them based in Orange County. The company is continuing to grow and hire with more than 200 openings, including 90 in Orange County.
“The company wishes to thank its partners, customers, and employees for a fantastic 25 years, and looks forward to continuing our journey together for many more years to come,” officials said.
Coming off a quarterly performance where the finance company’s total originations of loans and leases jumped higher than any quarterly figure the company posted in the past year, General Motors and General Motors Financial entered into a support agreement on Thursday, reaffirming what executives described as the critical role GM Financial plays in the parent automaker’s success.
The companies explained that this agreement provides for leverage limits and liquidity support to GM Financial if needed, as well as other general terms of support.
Under the terms of the agreement, as GM Financial expands its product portfolio and grows its business, GM committed to provide funding to GM Financial if its earning assets leverage ratio rises above pre-determined thresholds. GM extended an intercompany revolving credit facility to GM Financial to provide up to $1 billion of liquidity if needed.
Executives indicated this facility, which is subordinate to GM Financial’s senior unsecured and secured debt, will replace an existing $600 million line of credit from GM.
They also mentioned the agreement also provides that GM will use its commercially reasonable efforts to ensure that GM Financial will continue to be designated as a subsidiary borrower on up to $4 billion of GM’s corporate revolving line of credit.
“GM Financial is a core component of GM’s business and this agreement will strengthen its capability to support GM’s strategy,” GM president Dan Ammann said.
Since being acquired by GM in 2010, GM Financial has significantly increased its share of GM’s business, which now represents 75 percent of GM Financial’s consumer loan and lease originations.
And the finance company is also prospering within its division that services stores outside of GM’s franchise network.
In a quarter company executives said contained a “leveling of competitive intensity,” the AmeriCredit-branded business generated by GM Financial during the second quarter jumped to a higher level than in any quarter seen in a year.
AmeriCredit, which originates loans at non-GM dealerships, posted $855 million in paper during Q2, an amount $106 million higher than a year earlier.
GM Financial president and chief executive officer Dan Berce cheered Thursday’s move made by the parent automaker.
“With the acquisition of the international business, the growth in our North America product portfolio and the diversity of our funding platform, we are well positioned to support GM as its captive auto finance company,” Berce said.
“The support agreement represents the next step in the evolution of GM Financial and further cements our position as GM’s captive,” he added.
The support agreement has been filed by GM Financial on Form 8-K with the Securities and Exchange Commission.
Ally Financial launched a new tool this week to help consumers decide whether buying or leasing might be their best option when shopping for a vehicle.
Available for free on Ally’s website, the company explained the interactive buy or lease tool can help arm consumers with the right information to start the vehicle-financing process.
The tool leads consumers through five simple questions on their automotive and driving needs, including how many miles they drive annually, down payments intentions and maintenance, as well as preferences on how long to keep a vehicle.
After completing the questions, Ally indicated consumers will learn which option may best fits their needs — buying, leasing or the Ally Buyer’s Choice product. Consumers can explore additional information on these financing options, or take what they’ve learned and head into the dealership equipped with knowledge on the different choices available.
“Well informed consumers do their research and come armed with a game plan when looking to finance a vehicle,” said Andrea Riley, chief marketing officer of dealer financial services for Ally.
“Knowing what types of options are available before even stepping foot in the dealership can help consumers feel more confident that the decisions they are making are the right ones for their financial situation,” Riley continued.
The interactive tool is available for all consumers on Ally’s website at www.ally.com/auto/personal/explore-financing-options/.
Western Funding is now active on DealerCenter. Executives highlighted this integration makes Western Funding’s financial products more accessible to dealerships by offering instant approvals and the ability to change the structure of the deals to meet customers’ needs.
“We're excited to partner with DealerCenter to offer 24/7 instant approvals,” Western Funding president Guerin Senter said. “By offering automated decisioning, we’re more efficiently serving our dealership partners. Now we can automatically return an approval with an aggressive deal structure and allow the dealer to adjust it for more profit; this is a huge step toward our goal of serving more dealers.”
Western Funding provides finance options for independent and franchised dealerships across all 50 states. The company’s loan programs are geared toward the subprime borrower unable to access traditional lending credit because of the age of the vehicle being financed or the customer's employment and credit history.
“We’re confident that Western Funding will see an increase of business by using our platform,” DealerCenter vice president of sales Jesse Martin said. “We’re look forward to growing Western Funding’s business with our innovative technology, as well as offering our customers more financial resources.”
DealerCenter is a Web-based dealer management system catering to independent dealerships. The company provides technology to more than 10,000 dealers nationwide and strives to make DealerCenter.net the "definitive place" on the Internet for the dealer.
“Having recognized the changes in the market, we have integrated with DealerCenter to better serve our dealership partners,” Senter said.
"Even with the improved technology, we haven't forgotten our roots and are heavily supportive of the personal touch,” Senter continued. “We have an entirely dedicated team of credit analysts to support and review the decisions and ensure they work with the dealer. We also pride ourselves in fast funding. When we receive a complete package, we guarantee funding within one day but usually fund the same day.”
In addition to Western Funding’s loan programs, the company also offers bulk portfolio purchases of various sizes. Western Funding purchases accounts receivables from buy-here, pay-here dealerships, “allowing them to focus more time on selling cars rather than collections,” according to executives.
