Automotive News F&I Special Sections of 2008 - (Page NOV26) 26 • NOVEMBER 10, 2008 finance & insurance Report: Past-due subprime loans jump Alysha Webb awebb@crain.com The rate of delinquencies among subprime auto loans that are bundled by lenders and sold to investors is at an 11-year high, a new study says. In September, 4.3 percent of subprime loans included in asset-backed securities were at least 60 days past due — a 40 percent increase over September 2007, according to Fitch Ratings. Figures were unavailable for October. A subprime customer has credit problems and a credit score that generally falls between 550 and 619 on a scale that ranges from 300 to 850. By contrast, 0.7 percent of prime loans in assetbacked securities were delinquent for at least 60 days in September, Fitch says. That rate has been stable for much of the year and is up 9 percent from the year-ago month. Prime borrowers have credit scores of 680 and higher. Hylton Heard, director of Fitch’s asset-backedsecurities group, says a rising U.S. unemployment rate is stoking subprime-loan delinquencies. The U.S. jobless rate exceeded 6 percent in the third quarter. Longer vehicle loans and looser underwriting standards also have contributed to the boost in delinquency rates, Heard says. “We do expect losses in the prime and subprime to continue to rise through the end of the year,” Heard told Automotive News. Auto lenders sell securities backed by loans and leases to raise money. Lenders have had greater difficulty selling those securities amid the financial meltdown of recent months, aggravating the global credit crunch. At the same time, Heard says, auto lenders are working to reduce their credit risks and build reserves to offset expected increases in consumer loan defaults. As a result, Fitch is generally upgrading its ratings of prime asset-backed securities, although at a slower pace than last year. “This is probably the most stressful period we’ve seen in a long time,” Heard says. “But these deals are structured in a way that they should be able to withstand further increases in the unemployment rate.” c Toyota aims to win loyalty with credit card Donna Harris dharris@crain.com Card file Toyota Financial is issuing a Toyota-branded Visa card aimed at building customer loyalty. Cardholders can Earn rewards points for charges at Toyota dealerships and elsewhere Apply those points to the cost of new-vehicle purchases or leases, service, parts and accessories Qualify for low introductory interest rates and bonus points After finding success with a Lexusbranded Visa card, Toyota Financial Services is launching a similar credit card for Toyota owners. Executives of Toyota’s finance company expect the new card to boost customer loyalty at Toyota dealerships. The Toyota Rewards Visa card, issued by Toyota Financial Savings Bank, lets owners earn points they can apply to the cost of service, parts, accessories or a vehicle purchase or lease. Since Toyota Financial introduced the Lexus Pursuits Visa card in June 2005, more than 60,000 cardholders have redeemed about $4 million in awards points. Lexus Pursuits cardholders tend to shop more often at Lexus dealerships than do other Lexus owners, says Toyota Financial spokeswoman Kerry Rivera. They also spend more money per visit than other customers, Rivera says. Mike Wells, group vice president of Toyota Financial, says the new card will help Toyota’s “incredibly loyal” owners “get more out of their Toyota relationship.” Toyota Financial declined to forecast how many Toyota owners will sign up for the new card. The Toyota Rewards Visa card has no limit on how many points cardholders can apply to the purchase or lease of a new vehicle. There is no annual fee. and risk management. Pat Coll, U.S. Bank’s executive vice president of retail payments, says the card offers “one of the most generous rewards programs in the auto industry.” The card is limited to U.S. residents. Cardholders earn five points for every dollar spent at participating Toyota dealerships and one point for every dollar charged to the card elsewhere. The card does not carry an annual fee. There is no limit on how many points cardholders can apply to the purchase or lease of a new vehicle. Incentives include a low interest rate during the first six months of card ownership and 2,500 bonus points after the first purchase with the card. Pat LeClair, service manager of Toyota Financial’s Mike Wells: The Visa card will help owners “get more out of their Toyota relationship.” Greentree Toyota in Brookfield, Conn., says his dealership is taking part in the program. Although none of the dealership’s customers has applied for the card, LeClair said, the promotion “could be a great thing.” “It builds customer loyalty and retention for the dealer.” LeClair told Automotive News. Lexus dealers like their credit card program. Walt Kinney, finance manager of Sheehy Lexus in Annapolis, Md., says the dealership’s service business has increased since Lexus started issuing the branded Visa card. Using cash advances During the current credit crunch, Kinney says, some customers are signing up for the card so they can use a cash advance with an introductory 0 percent interest rate as a down payment on a new vehicle. Customers typically obtain credit limits of $10,000 to $11,000, he says. “They can use that card in the dealership immediately,” Kinney says. “If you get somebody who is upsidedown on the trade-in, this is another avenue to find money.” c Bank partners Toyota Financial Savings Bank is distributing the Visa card in partnership with U.S. Bank, which oversees the program’s marketing support http://www.cso.com http://www.cso.com
Table of Contents Feed for the Digital Edition of Automotive News F&I Special Sections of 2008 Automotive News F&I Special Sections of 2008 Automotive News F&I Special Sections of 2008 - (Page Cover1) Automotive News F&I Special Sections of 2008 - (Page JAN18) Automotive News F&I Special Sections of 2008 - (Page JAN19) Automotive News F&I Special Sections of 2008 - (Page FEB70) Automotive News F&I Special Sections of 2008 - (Page FEB71) Automotive News F&I Special Sections of 2008 - (Page FEB72) Automotive News F&I Special Sections of 2008 - (Page FEB73) Automotive News F&I Special Sections of 2008 - (Page MAR20) Automotive News F&I Special Sections of 2008 - (Page MAR21) Automotive News F&I Special Sections of 2008 - (Page APR30) Automotive News F&I Special Sections of 2008 - (Page APR31) Automotive News F&I Special Sections of 2008 - (Page JDB2) Automotive News F&I Special Sections of 2008 - (Page MAY25) Automotive News F&I Special Sections of 2008 - (Page MAY26) Automotive News F&I Special Sections of 2008 - (Page MAY27) Automotive News F&I Special Sections of 2008 - (Page MAY28) Automotive News F&I Special Sections of 2008 - (Page MAY29) Automotive News F&I Special Sections of 2008 - (Page MAY30) Automotive News F&I Special Sections of 2008 - (Page MAY31) Automotive News F&I Special Sections of 2008 - (Page MAY32) Automotive News F&I Special Sections of 2008 - (Page MAY33) Automotive News F&I Special Sections of 2008 - (Page MAY34) Automotive News F&I Special Sections of 2008 - (Page MAY35) Automotive News F&I Special Sections of 2008 - (Page MAY36) Automotive News F&I Special Sections of 2008 - (Page MAY37) Automotive News F&I Special Sections of 2008 - (Page MAY38) Automotive News F&I Special Sections of 2008 - (Page MAY39) Automotive News F&I Special Sections of 2008 - (Page MAY40) Automotive News F&I Special Sections of 2008 - (Page MAY41) Automotive News F&I Special Sections of 2008 - (Page MAY42) Automotive News F&I Special Sections of 2008 - (Page JUN24) Automotive News F&I Special Sections of 2008 - (Page JUN25) Automotive News F&I Special Sections of 2008 - (Page JUL26) Automotive News F&I Special Sections of 2008 - (Page JUL27) Automotive News F&I Special Sections of 2008 - (Page AUG32) Automotive News F&I Special Sections of 2008 - (Page AUG33) Automotive News F&I Special Sections of 2008 - (Page SEP30) Automotive News F&I Special Sections of 2008 - (Page SEP31) Automotive News F&I Special Sections of 2008 - (Page OCT48) Automotive News F&I Special Sections of 2008 - (Page NOV26)
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.