Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
Issue link: http://autodealermonthly.epubxp.com/i/89861
Just days before the summit that drew nearly 1,200 attendees, Experian Automotive reported that almost one in four new-car loans in 2012 have been to credit-challenged customers. "There is a huge shift toward new vehicles in special finance," added Auto Dealer Monthly CEO Greg Goebel, chairman of the Special Finance Conference and a featured speaker at the event. In fact, this third-party subprime financing is exceeding pre-recession levels in the new car market, confirms Experian's automotive branch of information services. Used car sales are also benefitting from the spigot of money turned back on to struggling Americans. The subprime market—both special finance and dealer-controlled financing—accounts for 44 percent of overall automotive sales, according to Goebel. Experian considers prime credit as a score of 680 or higher, while the average rating for a used car buyer is 659. That generally leaves pre-owned car purchases—which accounted for three times that of factory-to-show- room sales in 2011—to rely on alterna- tive methods to traditional financing, putting subprime financing on the re- bound. But don't pop the champagne just yet, says a southwest Florida special finance company. "We're getting back to prerecession levels," warned Mario Radigran, a panelist at the conference and president of Gulf Coast Auto Credit Corp. "We're not quite there yet." Cautious dealers are still trying to get a feel of just where financial institu- tions are at this stage of the eco- nomic recovery. "What I'm really interested in is what banks are buying at what tiers," said Kyle Schonauer, owner of one new-car and two used- car stores with in-house and third-party financing in Ohio, a state battered hard by the recession. He attended the special finance portion of the summit to gauge what finance companies are doing and to get in a little networking. "I got what I wanted," he said. "I was able to make some contacts with some banks." No fewer than 15 finance companies set up shop at the conference to answer dealers' ques- tions and publicize their services.. With a still-fragile automotive market, giving a shopper the keys to their dream car has taken a back seat to fitting a customer with the right loan, subprime experts told dealers at the Las Vegas conference. "Not sales(men), but loan counselors are what you need," said Mark Dubois of Performance Incorporated, an industry consulting and training firm. "You're dealing with people who have been turned down by everyone else." As borrowing power has taken a tumble along with credit scores after five years of economic turmoil, offering special financing and pay-here op- tions—including buying and leasing— have become ever more important. Survival of the Fittest The global recession that began with a financial market collapse in late 2007 hit bottom a year later. The sharp downturn rattled the automotive industry, putting a twist on Darwin's 25