Webinar Sheds Light  on Loan Originations

A recent Webinar titled, “Non-Prime Auto Finance Industry Update,” presented by the National Auto Finance Association, shed some light on the happenings of the industry during the second and third quarters of 2008. The program was presented by J.D. Power and Associates in conjunction with TransUnion.

Of the four credit tiers – super prime, prime, near prime and subprime – subprime saw the most significant decrease (percentage-wise) in originations in the second quarter (2Q) of 2008 when compared to the same quarter in 2007. Subprime originations decreased by more than 27.9 percent, or $5.3 trillion. That equated to 279,875 fewer subprime loans in a second quarter year-over-year (YoY) comparison.

Near prime wasn’t far behind with a 2Q YoY decrease in originations of more than $3.27 trillion, or 20.9 percent, and there were 152,559 fewer loans. Prime originations decreased by 12 percent, or $2.13 trillion, with a total of 88,166 fewer loans.

Super prime saw a 2.2 percent 2Q YoY decrease in originations, which equated to a decrease of more than $7.28 trillion and 69,061 fewer super prime loans. While the percentage decrease of super prime is much lower than that of subprime, when the $56.3 trillion worth of super prime originations in the 2Q of ‘08 is compared to the $13.7 trillion worth of subprime originations in the same period, the figures make sense.

Of the five sources of new auto loans – bank, captive, credit union, independent and national bank – not one saw an increase in originations during the second quarter of 2008 when compared to the same quarter in ‘07. Credit unions, however, saw a decrease of only 0.2 percent. Conversely, national banks saw the largest decrease, with 28.1 percent. Independents decreased 21.2 percent, captives decreased 8.2 percent and banks decreased 8.9 percent.

The Webinar also included some data about better-selling vehicles in the subprime market. According to the data, in the third quarter of 2008, the 2005 model year was the best-selling model year within the subprime market, with the ‘05 Nissan Altima and ‘05 Chevrolet Trailblazer having contract prices that were approximately $1,000 lower than the overall industry average. They also turned faster than many vehicles, with an average of 37 days to turn on the ‘05 Altima and 42 days on the ‘05 Trailblazer.

For both vehicles in the 3Q, the loan-to-value (LTV) was higher than the industry average of 107.4 percent. The ‘05 Trailblazer averaged an LTV of 112.5 percent, while the ‘05 Altima averaged an LTV of 108.3 percent. Plus, the total F&I income from the ‘05 Altima was $1,014, which is quite a bit higher than the industry average of $820 during 3Q ‘08. The total F&I income of the ’05 Trailblazer was slightly less than average at $799.