Automotive News F&I Special Sections of 2008 - (Page SEP30) 30 • SEPTEMBER 8, 2008 finance & insurance Study: Nonprime car loans get longer Donna Harris dharris@crain.com Consumers with the riskiest credit are taking out longer auto loans, a new study suggests. So-called nonprime buyers seek to “keep car payments affordable” in a tough economy, said Jack Tracey, executive director of the National Automotive Finance Association. The Hanover, Md., trade group, which represents lenders that serve customers with tarnished credit, sponsored the study. In 2007, 91 percent of nonprime new-vehicle loans were for more than 60 months, says the study, which surveyed 26 key lenders. During the previous year, 85 percent of nonprime loans were for more than 60 months. For used cars and trucks, the study found, 60 percent of nonprime loans Jack Tracey of the National Automotive Finance Association: Subprime buyers “are the first to get laid off.” were for more than 60 months, up from 53 percent in 2006. Many nonprime loan customers owe money on their trade-ins and must roll that debt into their next vehicle loan, Tracey told Automotive News. According to the study, nonprime lenders have tightened credit standards, making loans to a smaller percentage of applicants. Those tougher standards are showing up in higher credit scores. Last year, the average credit score for a Delayed maturity The percentage of vehicle loans longer than 60 months that were made to buyers with credit problems grew last year, a new study suggests. 2007 2006 New-vehicle loans Used-vehicle loans 91% 60% 85% 53% Source: National Automotive Finance Association customer taking out a nonprime new-vehicle loan was 570, up from 563 in 2006. For nonprime used-vehicle loans, the average credit score in 2007 was 542, compared with 537 the previous year. For all U.S. consumers, the average credit score is about 692 on a scale of 300 to 850. The slumping economy also is reflected in more bankruptcies on nonprime loans. Lenders surveyed for the study said 2.55 percent of their accounts became bankrupt in 2007, up from 2.09 percent in 2006. Losses from vehicle repossessions also climbed in 2007, the study said, to $6,824 per vehicle from $6,804 in 2006. “A tough economy is most quickly reflected in the portfolios of nonprime lenders,” Tracey said. “Subprime customers are the first to get laid off and first to struggle with their bills.” The study surveyed 26 nonprime lenders this year. The lenders have 3.1 million accounts and $39.8 billion in outstanding finance contracts. c Honda touts leasing while others fall back Alysha Webb awebb@crain.com BMW, Edmunds team up on loan site for consumers WOODCLIFF LAKE, N.J. — A Web site operated by BMW Financial Group Services of North America, www.up2drive.com, is a new auto finance offering on the Edmunds.com automotive consumer site. The BMW captive’s site enables consumers to apply and be approved for a vehicle loan. A service on the site allows consumers to negotiate with dealers and private sellers. The site also offers consumer information on buying, refinancing and selling cars and trucks. Edmunds.com links to up2drive. BMW Financial Services, of Woodcliff Lake, finances most BMW vehicles sold or leased in the United States. The captive has 700,000 customers and more than $28 billion in assets. LOS ANGELES — Leasing hasn’t become a bad word to all vehicle lenders, despite recent well-publicized pullbacks from the U.S. lease market by some automakers’ captive finance companies. American Honda Finance Corp., the captive of American Honda Motor Co. Inc., is the fourthlargest U.S. auto lender overall with 4.95 percent of the market, according to a new study by the AutoCount unit of Experian Automotive. But in the first half of 2008, Honda Finance was the No. 2 auto lessor, behind only GMAC Financial Services, AutoCount says. Honda spokesman Chris Martin said the company uses leasing “as a means of incentivizing sales when inventories are getting a little high” on certain models. Late last month, Honda’s Web site, www.honda.com, featured special lease deals on several versions of the Accord mid-sized sedan, the Ridgeline mid-sized pickup, the Pilot and Element crossovers and the Odyssey minivan. Leasing tends to attract consumers who are “a little more price-conscious,” Martin told Automotive News. Honda dealers say company executives tell them that consumers who lease Honda cars and trucks Dealers say Honda is pushing leases of Accords. tend to be more loyal customers than are buyers. Honda especially emphasizes leases of Accords, dealers add. Dan Roward, general sales manager of Honda of Santa Monica in suburban Los Angeles, says Accord leases are helping his dealership retain customers amid a shortage of Honda Civic small cars. “We’ve switched many people” who wanted to buy a Civic to an Accord lease, Roward says. Overall, leases account for one of every five new vehicles sold at retail. Martin declined to disclose the nationwide percentage of Honda new-vehicle sales that are leases. But dealers say Honda’s lease penetration rate in Southern California is about 38 percent. At Honda of Santa Monica, Roward says, the leasing rate is about 65 percent.c Dealer CPA group picks leader NASHVILLE — Ira Silver is the new president of the CPA Auto Dealer Consultants Association. The trade group represents accounting firms that work with more than 1,200 U.S. auto dealerships. Silver had been vice president of the association. He is partner in charge of the Orlando, Fla., office of the accounting firm Morrison, Brown, Argiz & Farra LLP. Silver specializes in dealership acquisitions and sales. http://www.up2drive.com http://www.Edmunds.com http://www.Edmunds.com http://www.honda.com http://www.cso.com http://www.cso.com
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