Happy Holidays! While many in the financial markets consider 2022 to be the year to forget, Auto Refinance as an asset type for banks and credit unions continues to show strength in the market. With slowing reamortizations and below average delinquencies, financial institutions can lean on recapturing seasoned auto assets and grow new memberships to balance loan portfolios without sacrificing yield (vs. Indirect Dealer).
Traditional Auto, including Indirect Dealer and Direct participations for Q1 ’22 showed a national average of .38% charge-off ratio. The beginning of the rising rate environment in Q2 helped reduce the average down to .28%, however. Q3 ’22 showed a surge in charge-offs to .55% (YCHARTS). Auto Refinance lenders, specifically those originating through Gravity Lending, report substantially better performing loans with record-low delinquencies and charge-offs as low as zero (.000%).
With over $20MM in Auto Refinance originations, Lender A (hidden to maintain confidentiality) reported a .003% delinquency and a .001% charge-off ratio. With over $60MM on their books, Lender B reports a .32% delinquency and zero (.000%) charge-offs. What does this say about the average Auto Refinance customer? I think it is fair to say they are beyond grateful and show that with ~99% better repayment when compared to the national average.
How strong is your Auto Program?