Subprime lenders get aggressive, race time
LAS VEGAS -- Business conditions are so good for subprime auto loans they can't possibly last, lenders said at an auto finance conference last week.
But while conditions are favorable -- including low interest rates, low borrowing costs for auto lenders and high pent-up consumer demand for subprime loans -- lenders are determined to grow, grow, grow.
"The competition since last March is about tenfold," said Gary Lorenz, CEO of Global Lending Services, one of the newest entries in subprime auto lending. "Everybody's getting more and more aggressive."
Jim Landy, CEO of CarFinance Capital in Irvine, Calif., said growing competition already is squeezing margins in subprime auto loans. CarFinance launched indirect auto lending in May 2012. It added direct-to-consumer lending in early 2012 via carfinance.com.
"Origination growth for us has been great. We're on plan," Landy said. He said CarFinance is originating about $30 million worth of loans monthly.
"Mid last year wasn't as competitive as it is today," he said. Landy said the company is willing to compromise on margins but not on credit quality. "The times of above-average margins are probably behind us," he said.
CarFinance Capital CEO Jim Landy: "The times of above-average margins are probably behind us."
Charles Bradley, CEO of Consumer Portfolio Services Inc. in Houston, said originations are up for his company but still short of prerecession levels.
"Originations are stronger than last year but not as strong as 2006-2007. It will probably be another year or two at least before we get there," he said. "Last year, we were doing $25 million to $30 million per month. This year we're doing $50 million. In 2007, we were doing over $100 million a month."
Lower borrowing costs are a boon. The company budgeted for borrowing costs of about 5 percent this year, but it's about half that and could go lower. Said Bradley: It feels like "Christmas."
You can reach Jim Henry at firstname.lastname@example.org.