LAS VEGAS — Despite an increased resistance in the secondary market for subprime powersports paper, ThunderRoad Financial continues to maintain “a reasonable percentage” of subprime in its portfolio, Chief Executive Donal Hummer Jr. said at PowerSports Finance 2017 last month.
“I do like subprime,” he told attendees. “… What is difficult is that at the end of day I have to look to be selling or securitizing loans off, and I have to know what my buyers want. Right now, there is resistance in powersports for subprime paper; I have to be mindful of that because I need to be able to sell that.”
That being said, Hummer encourages people to buy subprime paper because “I don’t see losses going up as quickly as the yield and coupon,” he said.
Reno, Nev.-based ThunderRoad Financial typically maintains its 20% concentration in subprime, “sometimes in the high 20s, sometimes 15%,” Hummer said. “It varies because we are not able to control what dealers send to us; it’s a mix of what they send and what we can approve.”
Subprime risk is not increasing, panelists at PowerSports Finance 2017 agreed.
“I think that the key, from our perspective, is to develop products which manage that risk appropriately for that expected credit,” Speed Leasing’s Founder Hasham Malik told attendees. “If we are looking at five-year leases, what do we think will happen over next five years? We evaluate risk on that basis, and we layer on top of that.”
American Cycle Finance — which specializes in subprime and nonprime — is “constantly mitigating that risk, analyzing it, and we do that on a day-to-day basis,” added Ben Donnarumma, managing director of American Cycle Finance.
For example, depending on the motorcycle and its performance in the portfolio, “we will allow higher LTVs for those,” and “we will stretch [loan terms],” Donnarumma said. “Some bikes, such as Slingshots, we haven’t’ had a luck with those,” which is why the Boston-based subprime lender will place more limits on those units.
“We don’t want the dealer to have a bad experience either, that chain goes all the way down the list,” he said. “We want the consumer to be successful [also], it’s in everybody’s best interest.”