only two days left in April; this may be the most destructive month in the history of American economy. More than 26 million American workers have applied for federal unemployment benefits. Billions of dollars of federal stimulus funds have been pushed to consumers and businesses, so the economy has not yet completely shaken off the predicament, and the US business engine will completely fail.
There is no doubt that part of this suddenly unemployed person asked the auto finance company to modify its existing installment contract or vehicle rental. But what about the bills that enter the portfolio, especially in the non-subordinate and subordinate fields?
Charles “Brad” Bradley Jr., chairman and chief executive of Consumer Portfolio Services, frequently gave him candid industry observations during quarterly conference calls between the company and the investment community. When CPS called back on April 16, Bradley called again.
"For years, we have been saying that the recession will have an interesting impact on the industry. This may solve this problem." Bradley said. "We heard that the development of many other companies is slowing down. Many companies are laying off employees. Some companies have stopped setting up.
He continued: "It will be very interesting to see the overall impact on industry competitors."
Westlake Financial Services has absorbed an active portfolio of $ 103 million in Coastal Credit, one of the providers that has withdrawn from business. The company closed its operations in Indianapolis in March and laid off 127 employees.
Nicholas Financial, another subprime mortgage provider, filed with the Securities and Exchange Commission on April 13 that the company temporarily employed about 40 employees, accounting for the company ’s employees. 15% of the total. Nicholas Financial said that the leave is expected to end on May 17, and all employees on leave are eligible to resume work from May 18.
Nicholas Financial said: "During the holidays, it will be reassessed according to the company's business conditions."
One of the largest subordinate auto finance companies-Credit Acceptance-did not designate leave or layoffs in its SEC filings. But the credit-accepting company postponed the release of its first quarter financial statements. He said: "The current outbreak of COVID-19 is to our business, the persistence of this epidemic and any other highly The outbreaks have had adverse effects, and health emergencies may have a significant adverse effect on our business, financial condition, liquidity and operating performance. "
Just this week, some states (such as Georgia) began to cancel orders for on-site shelters. In states where COVID-19 is more severe (such as New York), there are still instructions to stay at home.
Bradley said in a recent CPS conference call: "The longer the duration, the greater the pain for many of our friendly competitors."
Subordinate competitors of CPS, such as Credit Acceptance, Nicholas Financial and Westlake, may not have booked tickets as their high-credit contemporaries (captives), and these providers have now been included in radio and TV commercials. The service provider requires a 84-month period, which can be extended up to 120 days.
Bradley said again at the beginning of this month: "I think the first thing most people have to do is to increase credit. We want to get higher income, higher payment income. We almost stopped any exceptions to any procedures , We have improved the score overall.
Bradley then added: "Obviously, increase credit."
Jonathan Smoke, chief economist at Cox Motors, pointed to another reason financial companies may tighten their underwriting business.
Smoke wrote in this blog post: "Heavy debt sub-accounts have reached at least the highest level since 2006. In March, heavy auto loans reached 1.49%, which started from March 2009. The highest default rate, Smoke wrote here. Blog post.
On Friday, the calendar becomes May. Perhaps next month, the pandemic will begin to ease significantly and the economy will begin to recover. According to Dealertrack data shared by Cox Automotive, there have been some improvements in the field of auto finance.
According to information as of April 20, Dealertrack found that the number of same-store unique credit applications submitted for new cars decreased by 33% year-on-year, and the number of used car submissions decreased by 20% year-on-year. By year, because both data are higher.
As for the field of second-hand auto finance? Bradley may sum it up best.
"We heard different voices in the industry. He said:" We can't really grasp what is going to happen. "
News reference: https://www.autoremarketing.com/subprime/editor-what-will-subprime-auto-finance-resemble-after-crisis