Powersports financing has notoriously been dubbed a “risky business,” and some lenders still shy away from the industry. However, the small loans produce smaller losses, creating a more forgiving portfolio, according to Roger Douville, underwriting director for rateGenius, an Austin, Texas-based refinance loan broker.
The primary risk lies in “the concern that the collateral type is hard to locate if the loan goes bad,” but powersports financing can actually benefit the lender, Douville told Powersports Finance. Some financial providers “will say it costs just as much to collect $3,000 as it does $30,000, but you are not going to take a $15,000 loss on a $7,000 motorcycle,” he said. “[Lenders] need to consider powersports finance as an option for their own customer base for all of those reasons; it just makes good business sense because you really don’t want your borrowers to get used to going somewhere else for financing.”
There are no hard or fast rules anymore, but the bottom line is that lenders need to provide the products that borrowers are asking for, he said. “People focus too much on collateral and not enough on capacity ratio. Is this a stable individual? Do they have a good, strong profile? If the answer is yes, then why wouldn’t you give them a loan?”
Clearly the demand for powersports loans is there, and while some lenders are on board, many still have not entered the market. “If the lender truly wants to develop relationships and increase their share of ‘services per household,’ then they need to take another look at powersports lending,” because borrowers want the loans and are going to find those loans elsewhere, he added.
RateGenius acts as a matchmaker between lenders and consumers for the refinancing of auto and powersports loans. The company has 150 lenders nationwide across the auto and powersports industries.