Lack of Data Causes ‘Tighter’ Lending, Westlake Risk Exec Says

canstockphoto18632331Westlake Financial Services has seen “incremental growth” within its powersports lending this year, particularly with used vehicles, according to Chris Urban, the company’s vice president of risk management. However, the powersports field has not been backed yet in terms of risk in underwriting, he told Powersports Finance.

Los Angeles-based Westlake partnered with Kawasaki in June 2014 to launch Westlake’s powersports program, and rolled out nationwide in January 2015. The lender currently offers powersports financing on new vehicles exclusive to the Kawasaki brand, and earlier this year, Westlake also began financing any brand of used vehicles at Kawasaki dealerships, Urban said.

With less than two years under its belt, Westlake’s powersports data is limited, he said. “Performance information is coming in, but still not the amount of data that I would feel comfortable saying, ‘We have a good handle on how to reduce losses, how to improve performance, and how to calibrate the product correctly,’” Urban added. “It’s been especially challenging in the subprime segment, but our program is very data-driven and we can make continuous improvements.”

There are higher risks within powersports lending for several reasons, including that it’s typically not the consumer’s primary vehicle, it can be easily stolen, maintenance can be more expensive, and insurance is important because motorcycle crashes can be more eminent than a car, he said. “There’s more cost of ownership,” and for those reasons, Westlake has “to be tighter” with its powersports lending compared to its auto lending.

Westlake currently services 700 powersports dealers, and projects to increase to 1,500 dealers by the end of 2016. About 65% to 70% of consumers Westlake funds are considered subprime, with the remaining percentage falling into the near prime category.

With time, Westlake’s performance data will improve, Urban said, but since the program is still new “we just have to wait and get more samples and more loans in order to really see what makes good performance.”

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