Automotive News Finance & Insurance Blogs

Auto finance industry still paying for past sins

Posted 12:01 am U.S. ET, Sept. 24
blogs Jim Henry is a special correspondent for Automotive News.
 
Consumer Financial Protection Bureau regulators seem to have a caricature of a plaid, polyester sport coat-wearing car salesman in mind when they talk about auto retailing. (Picture the salesman in the movie Fargo who won’t take no for an answer from an angry customer who refuses to buy “Tru-Coat sealant.”) CFPB Director Richard Cordray, in opening remarks at a hearing last week ...
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The case for casting a wider net with credit apps

Posted 12:01 am U.S. ET, Sept. 17
blogs Jim Henry is a special correspondent for Automotive News.
 
Auto lenders complain they hate it when dealership F&I managers send them credit applications outside their preferred range of credit scores. Yet Greg Goebel, CEO of DealerStrong, a dealership training and consulting firm, advised finance managers to do just that at last week’s Industry Summit in Las Vegas. According to an analysis Goebel did with a database of some 200,000 transactions ...
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F&I wait times have virtual repercussions

Posted 11:00 am U.S. ET, Sept. 10
blogs Jim Henry is a special correspondent for Automotive News.
 
LAS VEGAS -- Dealerships know that customer satisfaction suffers if car buyers spend time sitting outside the F&I office. But there’s another reason why dealerships should slash F&I wait times: 63 percent of customers who use their mobile devices at dealerships use them to shop online for other vehicles and better deals at other dealerships. That’s according to Steve Braskamp ...
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Regulation forecast calls for rain, former CFPB exec says

Posted 11:00 am U.S. ET, Sept. 10
blogs Jim Henry is a special correspondent for Automotive News.
 
LAS VEGAS -- Rick Hackett, a former assistant director for the Consumer Financial Protection Bureau who was the bureau’s liaison to the auto finance industry, predicted the bureau would probably unveil a long-awaited rule next week, defining which nonbanks fall under the CFPB’s jurisdiction. “Supervision is coming, and soon,” Hackett said Tuesday at the Industry Summit her ...
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New rules for asset-backed securities could impact subprime lenders

Posted 12:01 am U.S. ET, Sept. 3
blogs Jim Henry is a special correspondent for Automotive News.
 
The Securities and Exchange Commission last week laid out new rules for asset-backed securities, the financial practice in which lenders bundle loans and sell them off to investors to raise money to fund new loans. The new SEC rules are primarily aimed at mortgages, but asset-backed securities backed by auto loans are also covered. The commission introduced some new rules for credit rating agenci ...
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Is CFPB guilty of spin?

Posted 12:01 am U.S. ET, Aug. 27
blogs Jim Henry is a special correspondent for Automotive News.
 
Remarks delivered by Consumer Financial Protection Bureau Director Richard Cordray and language used in a bureau statement last week were a lot harsher than the dry legalese of the consent order signed this month by the CFPB and First Investors Financial Services Group Inc. Bennie Duck, CFO of First Investors Financial Services Group, signed the consent order Aug. 7; Cordray’s signature is ...
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Did dealers hurt themselves with the carve out?

Posted 12:01 am U.S. ET, Aug. 20
blogs Jim Henry is a special correspondent for Automotive News.
 
There’s no mistaking that federal regulators are serious about policing auto lenders. The Justice Department’s recent subpoenas to Santander Consumer USA and GM Financial are just the latest blow, preceded by actions against other auto lenders by the Consumer Financial Protection Bureau and Federal Trade Commission. By extension, auto dealers feel they’ve got a big target on the ...
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Skipping wheel-and-tire was big mistake

Posted 12:01 am U.S. ET, Aug. 20
blogs Jamie LaReau covers the automotive retail beat for Automotive News.
 
Wheel-and-tire insurance is a valuable product. There, I admit it. It’s not the “snake oil” that a cynical friend once espoused it and other F&I products to be. The friend believes the products are big money-makers for the dealership but costly and useless to the consumer. The dealer’s profit margins are indeed fat. One F&I manager told me if the dealership pays $ ...
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N.Y. Times' demands are misguided

Posted 12:01 am U.S. ET, Aug. 13
blogs Jim Henry is a special correspondent for Automotive News.
 
Subprime auto loans have gotten most of the attention, but an editorial in The New York Times on Saturday makes other demands dealers and lenders are sure to dislike. For instance, the Times editorial said auto dealers, like mortgage lenders, “must” be made responsible for verifying “that borrowers have the ability to repay their loans and meet their other expenses.” How ...
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GM Financial subpoena shifts investigation away from dealers

Posted 12:01 am U.S. ET, Aug. 6
blogs News Editor James B. Treece oversees Automotive News' coverage of auto retailing.
 
When dealers saw headlines saying the U.S. Department of Justice had subpoenaed General Motors Financial Co. last month to produce documents relating to its subprime auto loan contracts, they could be excused for worrying that this represented another threat to their arranging car loans for consumers. It appears there’s nothing to worry about on that front, at least not for now. As reporte ...
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Calif. ballot proposal misses cut for November vote

Posted 12:01 am U.S. ET, July 30
blogs Jim Henry is a special correspondent for Automotive News.
 
A California consumer advocacy group’s ballot initiative that would have outlawed dealer reserve in the state -- part of a wider backlash against dealer reserve as a “hidden extra charge” -- won’t make it on the November ballot this year. “We decided to hold off,” Rosemary Shahan, president of Consumers for Auto Reliability and Safety in Sacramento, Calif., sai ...
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N.Y. Times story on subprime offers feds ammunition

Posted 12:01 am U.S. ET, July 23
blogs Jim Henry is a special correspondent for Automotive News.
 
A withering account of subprime auto lending in Sunday’s New York Times reinforces bad stereotypes about used-car dealers, smears subprime lenders and their investors, takes out of context an increase in delinquencies and loan losses from record lows, and provides ammunition to auto finance industry critics in Washington. It also blurs the differences between subprime mortgages, which contr ...
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Credit union ads highlight misperceptions of dealer reserve

Posted 12:01 am U.S. ET, July 16
blogs Jim Henry is a special correspondent for Automotive News.
 
A Florida credit union’s ad campaign beating up dealers and auto lenders for “rate markups” is hard to look at, but dealers and lenders should check it out to see what they’re up against in terms of public perception and in case the approach catches on in other states. The Space Coast Credit Union ads treat dealer reserve -- the small amount of interest lenders allow deale ...
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Why buy-here, pay-here is losing some turf

Posted 12:01 am U.S. ET, July 9
blogs Jim Henry is a special correspondent for Automotive News.
 
Even though broccoli is better for them, lots of people won’t eat it when they can have ice cream instead. The scenario is playing out more often these days in the auto finance world, too. That’s according to top executives of America’s Car-Mart, the giant buy-here, pay-here used-car retailer based in Bentonville, Ark., as more consumers pass on the broccoli -- offers from buy- ...
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Don't do much leasing? Better bone up

Posted 12:01 am U.S. ET, July 2
blogs Jim Henry is a special correspondent for Automotive News.
 
Leasing’s not just for luxury brands anymore. It’s spreading to mass-market brands too, experts say. That means F&I managers who are inexperienced or just rusty at leasing paperwork had better prepare for more customer demand for leases. That includes cobbling a menu of lease-friendly F&I products such as excess wear-and-tear protection or tire-and-wheel coverage. Leasing alr ...
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Ally moves closer to independence, cheaper money

Posted 12:01 am U.S. ET, June 25
blogs Jim Henry is a special correspondent for Automotive News.
 
Ally Financial will move one step closer toward independence from government ownership next month when two of its three remaining board members nominated by the U.S. Treasury step down from the board. That will be down from a high of four board members nominated by Treasury out of 11, which effectively amounted to control of Ally Financial. The latest change takes effect with Ally’s annual ...
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Who makes irrational loans? Not Me

Posted 12:01 am U.S. ET, June 18
blogs Jim Henry is a special correspondent for Automotive News.
 
Readers of “The Family Circus” in the funny pages will recognize the naughty, invisible gremlins named Nobody, Not Me and Ida Know. When the parents ask who broke the lamp or who ate the cookies, the kids blame the gremlins. Are the gremlins at it again in auto loans? Maybe they’re to blame for so-called irrational competition, presumably the result of lenders making unprofitabl ...
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U.S. House action on CFPB is symbolic

Posted 12:01 am U.S. ET, June 11
blogs Jim Henry is a special correspondent for Automotive News.
 
The auto finance industry, auto dealers, and their mostly Republican allies in Congress continue to make it clear they don’t like the Consumer Financial Protection Bureau or how it was set up in 2010. They also don’t like the CFPB and the U.S. Department of Justice using the disparate impact theory to try and prove discrimination in auto lending, the legal theory behind a $98 million ...
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Lender consent order grants insight into FTC

Posted 12:01 am U.S. ET, June 4
blogs Jim Henry is a special correspondent for Automotive News.
 
Dealers and their legal counsels should check out last week’s consent order between subprime auto lender Consumer Portfolio Services and the Federal Trade Commission, even though the case isn’t about dealerships. Dealerships aren’t even mentioned in the consent order, and in the FTC complaint in the case, they’re mentioned only in passing as the sources for the bulk of Con ...
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NADA's take on 'The Fallacy of Flats'

Posted 12:01 am U.S. ET, May 28
blogs Jim Henry is a special correspondent for Automotive News.
 
Editor's note: This blog has been amended to clarify NADA's basic position on flat fees and how dealers would be incentivized to choose lenders. The National Automobile Dealers Association has tried for months to impress upon the Consumer Financial Protection Bureau that switching from dealer reserve to flat fees will not eliminate dealerships’ ability to set their compensation for auto loa ...
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Dealer reserve to come under fire in D.C.

Posted 12:01 am U.S. ET, May 21
blogs Jim Henry is a special correspondent for Automotive News.
 
The Center for Responsible Lending and other advocacy groups are hosting a briefing on Capitol Hill Thursday to address what the groups call “auto lending abuses,” the chief one being dealer reserve, also known as dealer markup. The briefing could turn up the emotional heat in the dispute over dealer reserve. Until now the debate has been testy, but mostly academic. The consumer ...
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Chrysler Capital takes toll on Ally

Posted 12:01 am U.S. ET, May 14
blogs Jim Henry is a special correspondent for Automotive News.
 
Santander Consumer USA and Ally Financial Inc. passed each other coming and going in the first quarter in terms of business with Chrysler Group, but don’t expect them to exchange a friendly wave. The preferred lender agreement between Chrysler Group and Ally expired on April 30, 2013, after a four-year run. Chrysler replaced Ally with Chrysler Capital, a program in which Santander Consumer ...
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Dealer reserve is here to stay … right?

Posted 12:01 am U.S. ET, May 7
blogs Jim Henry is a special correspondent for Automotive News.
 
Auto lenders are sticking to dealer reserve despite the Consumer Financial Protection Bureau's crackdown and despite BMO Harris Bank's recent switch to a flat fee. That was the buzz at the Auto Finance Risk/Compliance Summit presented by Royal Media Group in California this week, according to a panel member. The CFPB wants lenders to switch to flat fees or some other form of dealership compensat ...
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Tax refund as down payment? Why not?

Posted 12:01 am U.S. ET, April 30
blogs Jim Henry is a special correspondent for Automotive News.
 
The first quarter is typically the strongest quarter of the year for subprime financing and used-car auto loans due to the timing of tax refunds, say industry experts such as Asbury Automotive COO Michael Kearney, who noted the trend last week. Tax refund season starts early. As of Feb. 14, the IRS had processed 31.3 million refunds, averaging $3,211, the agency said. As of April 18, it had sent ...
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Why Group 1 finds F&I a tougher sell overseas

Posted 12:01 am U.S. ET, April 23
blogs Jim Henry is a special correspondent for Automotive News.
 
Think F&I managers have it tough making a sale in the United States? It’s a lot tougher in the United Kingdom and in Brazil, Group 1 Automotive says. Group 1’s average F&I revenue per vehicle retailed in the United States last year was $1,371. In the United Kingdom, it was $615, and in Brazil, $416. “Americans want their car, they want it today, and they want to drive i ...
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