Auto & Powersports Finance News
May 16, 2017
Top Stories

S&P Global Ratings recently considered what two specific areas contain the most risk since loosening underwriting resulted in U.S. auto loans and leases rising steadily over the past several years to reach all-time highs in 2016. With more than $1 trillion in outstanding balances, S&P Global Ratings acknowledged the figure has raised questions about whether the growth will ultimately lead to significant asset quality deterioration and increased depreciation on leases, as well as which finance companies will bear the impact.

Three years ago if a customer walked onto Dan Reel's used car lot seeking a late-model off-lease Ford Escape, his answer was short: tough luck. The supply of lightly-used cars and trucks was tight because automakers had drastically cut back on bargain leases during and after the Great Recession. Recently, though, a computer search for available used vehicles within 150 miles of Reel revealed an eye-popping figure: 668 Escapes. That's enough to put more than 40 percent of the inhabitants of this small northeastern Ohio town, population 1,600, into the popular crossover.

Millennials are more cost-conscious than Gen Xers or baby boomers, but transparency and online F&I product introductions could sway them to open their wallets for add-ons, a new study finds. In 2016, millennials made up 29 percent of new-vehicle sales. In the next three years, according to Deloitte, millennials will account for 40 percent of new-vehicle sales, Cox Automotive says in a study, "Improving the Car Buying Experience for Millennials ... and Everyone Else."

Since the "Great Recession," which ran from the fourth quarter of 2007 through the first quarter of 2009, motorcycle manufacturers and motorcyclists have been waiting for motorcycle sales to return to "normal." However, rumblings from the vehicle loan industry could indicate that the motorcycle sales rebound, what there has been of it, might be at an end. After suffering in the wake of the financial crisis, powersports sales, including motorcycles, have experienced a modest resurgence in recent years, although sales are still off the lofty levels seen during the housing bubble.

Borrower fraud in U.S. auto loans is surging, and may approach levels seen in mortgages during last decade's housing bubble, according to a startup firm that helps lenders sniff out bogus borrowers. As many as 1 percent of U.S. car loan applications include some type of material misrepresentation, executives at data analytics firm Point Predictive estimated based on reports from banks, finance companies and others. Lenders' losses from deception may double this year to $6 billion from 2015, the firm forecast. 

Vehicle sales and finance have been positive drivers for consumer spending during the last four years. During the financial crisis, U.S. auto sales declined sharply, dropping to a low point of just over nine million in February 2009. Once the economy began to stabilize in 2011, pent-up buyer demand led to increased auto sales. Both sales and prices of autos have reached record highs. In 2015 and 2016, sales reached an annualized level of just over 18 million autos, nearly double the level from the depths of the crisis.


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