Tag Archive | "credit"

CUDL Credit Unions Picking Up the Pace

ONTARIO — After hitting a monthly low in March, CUDL credit unions have increased their market share by nearly 2 percentage points, and have maintained a share of more than 17 percent since May, CUDL, which provides an indirect lending platform that connects dealers to about 950 credit unions, revealed in late September. On a year-to-date basis, credit unions own a 16.7 percent share of the auto finance market.

Representing the seventh largest auto finance segment through August 2011, CUDL credit unions have financed more than 321,000 loans year to date, a 13.4 increase, reported F&I and Showroom magazine.

The segment’s auto loan penetration rate did decline to 16.1 percent in the second quarter from 16.6 percent in the year-ago quarter. However, credit unions were able to increase their unit loan volume by 13.4 percent through August.

“Although the total number of loans was flat since the first quarter of this year, the number of credit union members continues to grow,” said Andrea Salgado, a CUDL market research analyst who led the Sept. 28 Webinar.

Citing data provided by Callahan & Associates, Salgado added that auto loans represented 29 percent of the average credit union loan portfolio, based on dollar volume.

Salgado also noted that auto dealers continue to be a major driver of new business for CUDL credit unions, with 67 percent of consumer financed at the dealership being new members. Thirty-three percent of loans originated at the dealerships were made to existing members.

“These values have stayed the same for the last several months,” said Salgado, who noted that indirect loans were down 5 percent. “A year ago this was at 67 percent for new and 34 percent for existing.”

Prime new-vehicle originations made on the CUDL platform represented 76.4 percent of auto loans originated, down two percentage points from a year ago. Prime used-vehicle originations dropped 2.9 percentage points to 67.3 percent. Average FICO score for CUDL credit unions stood at 729 vs. 733 a year ago. The industry’s average FICO score, according to J.D. Power and Associates, is 728.

Average amount finance for used vehicles among CUDL credit unions was $17,939, while the industry average through July stood at $17,385. Average amount financed for new was up from $25,680 a year ago to 27,880 through August, according to CUDL data.

As for loan performance, delinquencies and charge-offs for the segment continued to track below the 1 percent mark for auto loans outstanding. Credit unions also claimed the lowest 60-day delinquency rate among other lending segments, including banks, at 0.33 percent, with dollar volumes of at-risk loans dropping by $1 billion.

The Webinar also provided an update on the overall industry, with Salgado reporting that auto loan volumes have increased for all lenders except for Chase and Toyota. Ally, she noted, continues to lead the way, growing its loan volume by 51.9 percent year to date.

Salgado also noted a rise in new-vehicle sales vs. used-vehicle sales, the two segments crossing paths between June and August. In August, new-vehicle sales increased 7.5 percent from a year ago, while used-vehicle sales declined 3.3 percent. Through August, new-vehicle sales have climbed 11 percent from last year, while used increased 4 percent. Combined, vehicle sales grew by 6 percent during the first eight months of the year.

Sales right now are tracking at a 12.1 million-unit rate, an increase from the 11.4 seasonally adjusted annual rate recorded through August 2010. Currently, market analysts predict that the industry will end the year between 12.5 and 12.9 million units sold. Salgado said she believes the industry will end the year at the lower end of that range.

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Nicolas Financial Increases Credit Line to Fuel Expansion

CLEARWATER – Nicholas Financial Inc. announced that it has increased the size of its bank credit line from $140 million to $150 million and has extended the maturity date to Nov. 30, 2013. All other terms and conditions of the credit line remain in effect, according to the specialty consumer finance company.

“We are extremely pleased that our consortium of bank lenders has agreed to increase our credit line and extend the maturity date,” said Peter L. Vosotas, chairman and CEO. “The credit line increase will allow us to continue our expansion strategy during the next few years.”

Nicholas Financial Inc. currently operates out of 57 branch locations in both the Southeast and the Midwest states, according to F&I and Showroom magazine.

“The company is very proud to continue its lending relationship with Bank of America, which began in March of 1993 and also includes Wells Fargo Preferred Capital, Capital One Bank, First Horizon Bank, and Bank of Montreal as participating banks,” Vosotas said.

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Navy Federal Lowers 36-Month Auto Loan Rate

VIENNA – Navy Federal Credit Union announced that it has lowered its 36-month new auto loan rate to an APR as low as 1.79 percent.

“We believe this is the lowest rate being offered by any bank or credit union in the nation today,” said Tony Gallardy, vice president of consumer and credit card lending.

Navy Federal reported strong auto lending growth in the past several months, driven by its 1.99 percent new auto rate for loans up to 60 months, according to the company. The credit union plans to maintain this rate, along with the new 1.79 percent APR rate for 36 months, reported F&I and Showroom magazine.

Navy Federal also announced that it will continue to offer a $100 bonus for members who choose to refinance their new-car loans from other financial institutions with Navy Federal.

“We are very excited to offer this unprecedented low rate to members at the start of the fall car-buying season,” Gallardy said. “With a lot of good deals in the market, this is a great time to get a new car or truck.”

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Fed Review: Credit Quality Continues to Improve

A new review by the Federal Deposit Insurance Corporation indicated that the credit quality of large loan commitments owned by U.S. banking organizations, foreign banking organizations (FBOs), and nonbanks improved in 2011 for the second consecutive year.

The 2011 Shared National Credits (SNC) Review revealed that the total analyzed loans declined more than 28 percent to $321 billion in 2011, although the percentage of criticized assets remained high compared to pre-financial crisis levels. Loans rated as doubtful or loss — the two weakest categories—fell 50 percent to $24 billion in 2011, reported F&I and Showroom magazine.

The review cited operating performance among borrowers, debt restructurings, bankruptcy resolutions, and ongoing access to bond and equity markets as reasons for the improvement. Industries leading the improvement in credit quality were finance and insurance, real estate, construction, media and telecommunications.

Despite the improvements, the SNC noted that poorly underwritten loans originated in 2006 and 2007 continued to negatively affect the SNC portfolio, as nearly 60 percent of criticized assets were originated in these years. Refinancing risk remained elevated as nearly $2 trillion, or 78 percent of the SNC portfolio, matures by the end of 2014, according to the SNC. Of this maturing amount, $204 billion was criticized.

Despite nonbank entities owning the smallest share of loan commitments, they owned the largest share of classified credits at 58 percent.

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Industry Reacts to S&P Downgrade

Chris Stinebert, president and CEO of the American Financial Services Association (AFSA), said it’s too early to know the full impact of the S&P’s downgrade of U.S. debt, especially with the Dow Jones Industrial Average switching between big gains and losses each day this week. His concern is what the actions taken by Standard and Poor’s last week, coupled with turmoil on Wall Street and in Washington, D.C., will do to the still-jittery consumer psyche, according to F&I and Showroom magazine.

“We don’t expect the downgrade to have a major impact on the auto finance industry,” said Stinebert, who noted mortgage rates dropped even during Monday’s turmoil on Wall Street. “Our biggest concern is the downgrade’s impact on consumer confidence, which could cause consumers to delay buying vehicles. It’s a little early to tell the full impact, especially since the markets bounced back on Tuesday.”

The markets, however, whipped back the other way on Wednesday, with the Dow dropping 519 points after jumping 429 points on Tuesday. That was after the Dow dropped 634.76 points on Monday, the worst point decline in more than 100 years.

As of early morning Thursday, the Dow had increased more than 200 points following a positive report from the U.S. Department of Labor. It showed the number of claims for unemployment benefits fell by 7,000 from July to a four-month low.

Stinebert said the association wasn’t surprised by the S&P’s actions. The 105-year-old ratings agency had been warning about its potential downgrade. What’s encouraging, he added, is that Moody’s and Fitch Ratings maintained their AAA rating of U.S. debt, and U.S. Treasuries remain strong. “The quality of auto finance has been strong and the underlying assets are well understood. Over time, rates will go up, but only as the economy improves.”

That was the message the Federal Reserve sent on Tuesday when it said it would hold short-term interest rates near zero through mid-2013 to prop up the credit markets. Whether that will help boost consumer confidence remains to be seen, especially since the Fed did not announce any new measures to stimulate growth.

On Monday, Bandon, Ore.-based CNW Research reported that its Jitters Index experienced the largest month-over-month increase since the firm introduced the metric in 1996. It jumped 6.9 percent in the first seven days of this month vs. July and 5.5 percent vs. August 2010.

Research firm Consumer Edge Research reported on Wednesday that its Interim Consumer Economic Index dropped 8.5 points from July’s full-month reading of 55.4. One analyst for the Stamford, Conn.-based firm said the steepness of the drop could mean that confidence among high-end consumers is weakening.

Edmunds.com, however, said on Wednesday that the stock market turmoil and decreased consumer confidence had yet to impact car sales. It reported that new-car sales in August were tracking at a 12.1 million-unit year. That projection, however, includes fleet sales, which are typically strong in August.

“The downgrade of U.S. debt has not negatively affected car-buying conditions,” said Lacey Plache, Edmunds.com’s chief analyst. “While the risk to new-vehicle sales from falling consumer confidence is undoubtedly higher as a result of the downgrade, favorable buying conditions — increased vehicle availability, increased incentives and continued low interest rates — should offset much of the debt downgrade’s effect on consumer confidence.”

The AFSA’s Stinebert added that he doesn’t expect the downgrade to impact the ability of finance sources to access the asset-backed securities (ABS) market for funding, which has been key to the recovery of the auto finance industry.

“The performance of auto ABS has been very good; the collateral and returns for investors have been good,” he said. “Investors are searching for yield and auto ABS has been fertile.

“We’ll keep close watch on showroom traffic,” he added. “This time of year is typically busier with the introduction of new models.”

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Ford, Dealers Say Credit Access Helping Recovery in Auto Sales

New-vehicle buyers are having an easier time getting credit, signaling U.S. auto sales may continue to accelerate after last month reaching the fastest pace since the government’s “cash for clunkers” program, Bloomberg reported.

Federal Reserve data shows banks began easing consumer-lending standards in July, and the Fed’s loan facility program rejuvenated the market for securitized auto debt, said Ellen Hughes-Cromwick, Ford’s chief economist. Data from CNW Research shows improved sales for buyers with weaker credit scores.

“Credit has begun to ease for automotive in general,” Hughes-Cromwick said today in a telephone interview. “We should see consumer credit begin to evidence some recovery, but it is a slow go. I don’t think anybody is baking in some sizable cyclical uplift in the next 12 to 18 months.”

Auto retailers including Group 1 Automotive Inc. and CarMax Inc. have said credit is less of a setback now after tighter lending helped slow U.S. auto sales to 10.4 million deliveries last year, the lowest since 1982. Sales in September rose to a seasonally adjusted annual rate of 11.8 million, the fastest pace since August 2009, according to Autodata Corp.

That’s still less than the 16.8 million annual average from 2000 to 2007, as Americans defer big-ticket purchases amid weak consumer confidence and high joblessness. Payrolls fell by 95,000 workers last month, more than forecast in a Bloomberg survey of economists, as the unemployment rate held at 9.6 percent, according to Labor Department figures released today.

“Credit is certainly available to meet the consumer’s needs,” Peter DeLongchamps, a vice president at Houston-based Group 1 Automotive, said in a telephone interview. “For current sales levels to increase, we need additional showroom traffic.”

The share of new-vehicle sales to buyers with subprime credit rose to 9.9 percent in September, the highest since February 2008, according to consulting firm CNW Research.

Subprime buyers represented 6.8 percent of the new-vehicle market through the first nine months of the year, according to CNW. That’s up from 5.7 percent last year, while short of the 14 percent share in 2006, the data shows.

CNW, based in Bandon, Oregon, defines subprime borrowers as having a FICO score below 619. Fair Isaac Corp.’s FICO scores use variables including the number of credit inquiries and missed payments.

Ford Motor Credit Co., the finance arm of the Dearborn, Michigan-based automaker, sold $500 million of bonds backed by dealer payments last month and had a similar offering worth $1.13 billion in March with help from the Fed’s Term Asset- Backed Securities Loan Facility.

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