Independent Banker - July 2017 - 49

.07%
Increase in auto loans
between 2015 and 2016
at banks with less than
$1 billion in assets
on the interest rate. " When we went
away from basing how we buy the
contract from the interest rate to
the fl at fee, that helped, " Rohlfsen
says. " It makes it easier for the
dealerships. "
He says his bank also lowered its
interest rates on used-auto loans,
" When we went away
from basing how we
buy the contract from
the interest rate to the
fl at fee, that helped. It
makes it easier for the
dealerships. "
-TODD ROHLFSEN,
FARMERS STATE BANK
which naturally made its offer more
attractive to buyers. But lowering
rates is not always required for
growth: Buhrmaster says 1st National
has seen auto-loan growth this year
even while raising rates.
In the end, success in auto lending
may come down to the one advantage
community banks always seem to
have over the competition: hands-on
attention to customers.
" It comes down to service, to taking
the application and turning it around
quickly, " Ashbaugh says. " Rate obviously
helps, but that being said there
are a lot of great rates out there now,
so it does come down to service. "
Ed Avis is a writer in Illinois.
independentbanker.org
ICBA IndependentBanker 49
Challenges ahead
Auto lending among community
banks is not without challenges. For
example, the positive trends in both
new and used cars may be changing.
Automakers have reported
slower new-car sales in 2017
than expected. Ford, for example,
reported that sales of light vehicles
dropped 7.2 percent in March compared
to the year before.
On the used-car side, J.D. Power
Valuation Services reported that
used-car prices dropped about 4
percent in 2016, the fi rst slide since
2008. Lower car sales, and lower
used-car sale prices, naturally
aff ect the profi tability of banks that
off er auto lending.
Another challenge is the
potential for more government
interference in the market. The
2016 International Automotive
Lending & Leasing Survey found
that 21 percent of US banks feel
compliance is a challenge to growth
and profi tability, which follows only
technology concerns on the list of
challenges.
" Government interference is one
thing that can hurt the business, "
says John Buhrmaster of 1st
National Bank of Scotia. " If the
CFPB [Consumer Financial Protection
Bureau] gets involved, that
will kill the business for community
banks. But the trend is that the
CFPB is not going to interfere. "
Buhrmaster says another
government concern is federal
investigations of discrimination
claims against auto lenders. " The
Justice Department has been
coming after auto lenders for what
I consider fake discrimination
claims, " he says. " That doesn't
seem to be the case with [the current
presidential administration],
but it does seem to have been with
previous administrations. That's a
threat to the industry. "
Regardless of those challenges,
auto lending stands to play an
important role for community
banks for a long time.
" It's a fun business. It's a thrill
ride, " Buhrmaster says. " You
have to have the stomach for it,
because you take some losses.
But as you learn the business, it
can be a huge success. "
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Independent Banker - July 2017

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