Tag Archive | "new-vehicle financing"

Fed Reserve, CFPB Leave TILA, CLA Dollar Thresholds the Same for 2017

WASHINGTON, D.C. — The dollar thresholds in the Truth in Lending Act (TILA)’s Reg. Z and the Consumer Leasing Act (CLA)’s Reg. M for exempt consumer credit transaction will remain at $54,600 for 2017, the Federal Reserve Board and the Consumer Financial Protection Bureau announced on Nov. 23.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the TILA and the CLA by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the “Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).” If there is no annual percentage increases, the board and bureau will not adjust the exemption threshold.

“Based on the CPI-W in effect as of June, 1, 2016, the exemption threshold will remain at $54,600 through 2017,” the two agencies stated in a joint notice.

The decision means consumer credit and lease transactions at or below $54,600 will continue to be subject to the protections and requirements of Reg. Z and M, according to the National Automobile Dealers Association (NADA)’s Regulatory Affairs Group.

“This announcement is consistent with the Dodd-Frank Act amendments to the Truth in Lending Act and the Consumer Leasing Act to adjust these thresholds each year by the annual percentage increase in the Consumer Price Index,” the NADA said.

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Ford Credit Now Offering 84-Month Financing

DEARBORN, Mich. — In a dealer bulletin obtained by F&I and Showroom magazine, Ford Motor Credit announced the availability of 84-month financing on new retail and subvented rate contracts.

The 84-month program, which allows for maximum interest rate markup of 100 basis points on standard contracts, is only available to car buyers with FICO scores at and above 700. The program will require a minimum of $15,000 in financing, with advances set at a maximum 115%.

“Customer demand for 84-month financing is increasing,” the captive stated in its April 5 dealer bulletin. “In the spirit of supporting the sale of Ford and Lincoln vehicles, as well as providing you with a sustained competitive advantage, Ford Credit is offering 84-month new retail financing effective April 5.”

Terms have been stretching, according to recent auto finance data, with consumers looking for ways to keep their monthly payments affordable as vehicle prices continue to rise.

In the fourth quarter 2015, according to Experian Automotive, vehicles loans with terms longer than 60 months accounted for 71% of all new vehicles financed during the period. The firm also noted in its quarterly report that auto loans with terms in the 61- to 72-month term band accounted for 42% of new vehicles, while loans with terms between 73 and 84 months accounted for 29% of all new vehicles financed in the fourth quarter — a 12% jump from the prior-year period.

In its bulletin, the captive urged dealers to consider the impacts of longer term loans, noting that “the longer the contract term, the longer it takes the customer to be in an equity position, and the longer it takes for the customer to return to your showroom to trade.”

The bulletin also urged dealers to educate customers about the high interest costs associated with longer term loans, noting that “shorter term financing and leasing are likely better options” for most customers.

“Terms of more than 72 months have increased to 23% of all new retail financed vehicles in the U.S.,” the bulletin stated. “While extended-term financing is appealing and allows the customer to purchase more vehicle at a lesser payment, it is important to consider the impact on trade-cycle management and customer loyalty.

“Ford and Lincoln are refreshing their vehicles more frequently with improvements to technology, safety features and fuel efficiency,” the bulletin continued. “Longer term financing may also delay a customer’s ability to upgrade to the latest and greatest.”

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Experian: More Consumers Turning to Leasing, Used Vehicles

SCHAUMBURG, Ill. — The average amount financed and the average monthly payment for new vehicles financed during 2015’s end-of-year quarter rose to record levels, according to Experian Automotive. But those weren’t the only records set during the period.

The credit reporting agency reported today that the average amount financed for a new vehicle in the fourth quarter increased by $1,170 from the prior-year period to $29,551 — the highest level recorded by Experian. The average monthly payment also rose $11 from a year ago to a new high of $493.

“People shop for vehicles largely based on monthly price, and right now, average dollar amounts for new vehicle loans are soaring,” said Melinda Zabritski, senior director of automotive credit for Experian Automotive. “In order to stay within their budget goals, we have seen that more consumers — even those within the prime and super-prime risk categories — are turning to leasing and used vehicles as cost-effective alternatives to buying new.”

Leasing accounted for a record high 33.6% of all new financing during the quarter, with the average lease payment landing at $412.

Additionally, used-vehicle loans accounted for 62.8 percent of all vehicle financing, with the average amount financed for a used vehicle coming out to $18,850. The average monthly payment for a used vehicle, according to Experian Automotive, was $359, with payment gap between new and used widening to an all-time high of $134 in the fourth quarter.

“Over the course of the last few years, we have seen the market stabilizing nicely,” Zabritski noted. “Credit scores are flattening out for new-vehicle financing and more prime consumers are shifting to used, which is helping increase the average score there as well.”

Experian reported that average credit scores across the board have flattened in the past few years. The average credit score for a new vehicle loan was 711, down from 712 in the prior-year period. Average credit scores for new vehicles peaked at 736 in 2009, then dropped 25 points from that period’s end-of-year quarter to the fourth quarter 2015. However, in the past six years, according to the firm, average credit scores for new-vehicle loans have dropped by only four points each year.

For used vehicles, average credit scores increased by one point to 649. Used-vehicle scores also have been relatively flat in recent years after peaking in 2009 at 657.

Here are other findings from Experian Automotive’s fourth quarter report:

  • Reliance on financing continues to grow, with 85.9% of all new vehicles and 54.7% of all used vehicles sold during the period having been financed.
  • The Top 5 models leased were the Honda Civic, Honda Accord, Toyota Camry, Toyota RAV4 and Ford Escape.
  • The Ford Fusion and the Chevrolet Silverado 1500 showed substantial gains in leasing during the period, rising 22% and 38%, respectively
  • The average interest rate for a new-vehicle loan was 4.63 percent, while the average interest rate for a used-vehicle loan reached 8.78 percent
  • Average loan terms for new and used vehicles held steady at 67 months and 63 months, respectively
  • Longer-term loans (those extending 73 to 84 months) for new vehicles grew by 12 percent to account for 29% of all new vehicles financed during the quarter. The percentage of used-vehicle loans with longer terms rose 10.8% to 16.4%.

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Asbury Secures $900 Million Credit Facility

DULUTH — Asbury Automotive Group Inc. announced that it has entered into a new $900 million, five-year syndicated credit facility with nine financial institutions and five manufacturer-affiliated finance companies.

The new syndicated credit facilities, which mature in October 2016, provide for up to $625 million for new-vehicle inventory floorplan financing, up to $100 million for used-vehicle inventory floorplan financing and up to $175 million for general corporate purposes, according to Asbury. The facilities also provide for the expansion of the availability thereunder, up to a total availability of $1.175 billion, reported F&I and Showroom magazine.

“The new credit facility provides the operational and strategic flexibility we will need for the next five years,” said Scott J. Krenz, Asbury’s senior vice president and CFO. “We are extremely pleased with the support from of our banking partners and look forward to continuing to build on those relationships.”

The syndication was arranged through BofA Merrill Lynch, who also serves as the administrative agent. JPMorgan Chase Bank, N.A., and Wells Fargo Bank serve as co-syndication agents.

Lenders in the new syndicated credit facilities include American Honda Finance Corporation, BMW Group Financial Services NA, LLC, Mercedes-Benz Financial Services USA LLC, Nissan Motor Acceptance Corporation and Toyota Motor Credit Corporation. The nine commercial banks and other lending institutions in the credit facilities include BofA Merrill Lynch, N.A., Bank of the West, Comerica Bank, Deutsche Bank Trust Company Americas, Flagstar Bank, FSB, JPMorgan Chase Bank, N.A., Mass Mutual Asset Finance LLC, U.S. Bank National Association and Wells Fargo Bank, N.A.

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