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12/16/09
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December 21, 2009
www.usedcarnews.com
Automotive Credit Better In Second Half By Ted Craig
AmeriCredit Corp. is ramping up for higher originations in 2010. CEO Dan Berce said during a recent investor’s presentation that the company was hiring staff to meet higher levels. “We’re investing in rebuilding origination levels,” Berce said. The company worked with 15,000 dealers in 2007. It now works with 5,000. AmeriCredit slashed originations the past two years, as did most finance companies during the credit crisis, and needed fewer dealers. Berce said the company isn’t in a hurry to get back to the levels of two years ago. He said competition today is much more rational and allows for better returns. Originations rose to $300 million in November, up from $229 million in September. Much of the decrease in originations resulted from tighter credit standards. The average credit score rose to 250 from 239. That’s using an exclusive scoring model with
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350 as the highest score. AmeriCredit loosened credit in some states with better-performing economies, Berce said. Another reason for fewer originations is the overall decrease in sales. AmeriCredit entered a program with General Motors Co. to boost subprime new-car sales, which fell more than subprime used sales. GM pays AmeriCredit to offer a lower rate on new-car contracts from its dealers. Berce said this is the kind of program GMAC would offer in the past. AmeriCredit executives hope to gain a greater share of usedcar sales at GM dealerships, he said. Berce expects losses to peak this quarter and for contract performance to do better in 2010 regardless of the economy’s strength. Contracts purchased in the past two years have outperformed considerably the 2006 and 2007 vintages. “(The 2009 vintage is) coming out the gate better than any other vintage in our history,” Berce said. The 2008 vintage is more 2005, with loses around 10 percent. It helps that large players such as HSBC and CitiFinancial exited the market. The competition for volume led to better credit decisions, Berce said. The automotive lending industry in the U.S. showed signs of stabilization during the third quarter of 2009, according to an analysis by Experian Automotive. “We are seeing signs of stabilization in the automotive lending market that could spell good overall health for the auto industry in the long run,”
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2009 M OV E R S A N D S H A K E R S
Jeff Braatz It was a tough year for this Michigan dealer. The state’s unemployment rate was the nation’s worst and Braatz had to close two of his three lots due to the lender pullouts. But the 2009 National Quality Dealer of the Year adapted to the market trimming inventory and focusing more on inhouse financing. He also rallied fellow dealers by helping create the MidMichigan chapter of the state’s IADA. His professional achievements made him the first Michigan dealer to win the prestigious award. said Scott Waldron, president of Experian Automotive. The growth rate for 30-day delinquencies, while still rising, has slowed significantly. The 30-day delinquency rate rose 5.8 percent from the third quarter of 2008 to the third quarter of 2009 (3.14 percent to 3.32 percent delinquencies). The growth rate from third quarter 2007 to third quarter 2008 was 9.5 percent. The average credit score for
Chip Perry Perry, president and CEO of AutoTrader.com, has long been a supporter of the independent automobile industry. But when the National Independent Automobile Dealers Association lost its main sponsor, Auto Trader Publications, Perry stepped in and the Web site funded the NIADA’s National Quality Dealer of the Year award. Of course, the print publications were casualties of the Internet’s success as advertisers began moving more business into the digital marketplace in 2009. new vehicle loans in the third quarter of 2009 was 775, up from 762 in the third quarter of 2008, showing that lenders are pulling back from riskier loans. Average credit scores for used vehicle loans also rose to 684 in the third quarter of 2009 from 670 in the third quarter of 2008. In addition, the average new vehicle loan dropped from 63 weeks in the third quarter of 2008 to 62 weeks in the third quarter of 2009, and the average
Tom Caruso After 30 years in the auto auction industry, Caruso was named CEO and president of ADESA this year. He was promoted from chief operating officer, a position he held since 2008. Caruso began his career in 1980 at Concord Auto Auction, which was purchased by ADESA in 1992 and later became ADESA Boston, which remains ADESA’s largest U.S. auction. Caruso also served as president of the National Auto Auction Association in 2007. used vehicle loan dropped from 59 weeks in the third quarter of 2008 to 57 weeks in the third quarter of 2009. “While higher-than-average delinquency rates are still with us, and may be for some time, the fact that the rate of increase is slowing is definitely some positive news for an industry that hasn’t had much as of late,” said Melinda Zabritski, E x p e r i a n ’s d i r e c t o r o f automotive credit.
IN THIS ISSUE • A dealer’s creative marketing brings customers and complaints. – Page 3
• The best news from 2009 is that it’s over. – Page 8
• Florida has a new management team for its IADA. – Page 5
• A classic product expands its reach in the automotive field. – Page 13