If I were a finance and insurance manager, I'd mentally prepare to pitch products to more customers with a low credit rating and low income.
Not that there won't be more high-end folk, too.
But based on what some large retail groups were saying last week, two trends are on the horizon:
- There is slow but steady growth in subprime lending.
- Some dealers are forgoing extras when reconditioning trade-ins to keep the price down for low-income customers.
At Lithia Motors Inc., CEO Bryan DeBoer says there is plenty of opportunity to increase subprime lending.
Presently, subprime lending makes up about 15 percent of the overall market, DeBoer says. The normal level should be 20 to 25 percent, he adds, noting that subprime lending was 25 percent of the overall market pre-recession.
"We're seeing new banks enter the market all the time that were not present in 2008," DeBoer says. "We're seeing those banks interested in doing business with us again in 2012."
At Lithia, subprime lending accounted for 15 percent of finance deals in the first quarter compared with 12 percent a year earlier.
Meanwhile, Sheehy Auto Stores CEO Vince Sheehy says he is relaxing his inspection standards on some used vehicles to make them more attractive to low-income customers. For example, Sheehy says he might forgo adding new tires to a used car, thereby whacking hundreds of dollars off the price of the car.
These trends mean more customers. And that means more opportunities for finance managers to make money -- if they know how to pitch to people without a lot of discretionary cash.