Nov. 30, 2009 – Lenders study reveals notable changes
November 30, 2009
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So, who’s still left in the game?
You had 19 qualified buyers last Saturday. Good scores, steady employment, solid addresses and phones, no bks, good downs and hot to ride. They filled out the apps, and you called them in on Monday.
Fifteen turndowns. Fifteen deals lost. Four delivered.
What’s going on here? You know they were qualified buyers, and you know they should have been bought. But they weren’t. And now you are on the phone trying to work your lenders, and you’re getting nothing. Nobody wants to talk. You’re dead.
It took me years to figure it out. I finally went to the credit union and talked face to face with my screeners. It wasn’t my paper. It wasn’t my customers. It was them. They were out of money. Or the auditors didn’t like their ratios. They couldn’t make the loans because of their own problems, not because of my customer’s credit-worthiness. It was a difficult lesson to learn. You need more than one lender. You need more than two lenders. You may even need three that you feed the paper to, keeping “loyal” to all three with a mix of A, B and C loans. But most important of all, you need to keep your ear to the ground to know when it is time to bail, and when it is time to find a new source.
So who is making loans today? I really wanted to know, so I scanned 533,000 deals from hundreds of metric dealers over the past four years, sifted $4 billion in sales, normalized the names of thousands of lenders, ran the queries and the three charts included here show what I found.
First. Let’s talk about the major lenders on the metric side only, with credit unions all lumped together. We’ll pull the credit unions apart a little later, but the big guys first. Here it is: In my sample of 533,000 deals finalized between 2006 and 2009, HSBC dropped from 44 percent of the market to 22 percent. That was a loss of 22 market share points. Right behind them was GE, who went from 18 percent of market to just 6 percent. They dropped by 12 points. That is 34 points of lost market share between the two of them.
So where did it go? Eaglemark entered the metric market late in 2009, but by September they had managed to grab 2 percent of all metric financed deals. Credit unions increased by 8 points from 11 percent to 19 percent, but the two big winners were American Honda Finance and Sheffield. American Honda Finance increased by 11 points, and Sheffield grew by 12 market share points.
So now we know that while GE and HSBC have withdrawn significantly, both American Honda Finance and Sheffield have stepped up and are lending money.
Next, let’s look in more detail at the credit unions. As mentioned above, in 2006 credit unions were holding 11 percent of the paper generated by motorcycle dealers. That percentage rose to
19 percent in September of this year. But which credit unions are they? I found only one that rose to any national prominence, and that was Navy Federal. In 37,000 financed deals from 2009, they funded 300, leaving the remaining 36,700 contracts scattered through various other regional credit unions.
So, two stories here. First, two major lenders (GE and HSBC) have each retreated significantly from the market. American Honda Finance has taken up a lot of the open territory, and the rest of it has been seized by the new entrant in the field, Sheffield. Second, credit unions as a group have become a significant source, but with the exception of one (Navy Federal), they are small, highly localized, require cultivation and need a much a closer relationship with the dealer.
Change is constant. Financing is still available, but it must be found, and it is likely closer to home than you have considered in the past. Get to know your credit unions. Work with them, teach them about the powersports business, and become a member yourself. No one source will solve all your problems, but perhaps this study will guide you to a solution set that will work in your dealership.