LAS VEGAS — As competition in powersports finance heightens, some lenders are extending terms mirroring a trend in auto finance, Brian Landau, senior vice president and automotive business lead at TransUnion, said during a presentation at PowerSports Finance 2017, however many powersports lenders remain cautious about 84-month terms.
“On the loan side, lenders are trying to make the monthly payment more digestible for consumer — because just like in motorcycles, auto is where a lot of younger consumers are thinking about monthly payment and using payment as a reference point for what they can buy,” he said. “Interest rates have been at an all-time low, slowly rising, but given the size of the asset relative to a home loan or mortgage, they are not going to necessarily move the needle that much with regards to monthly payment. So term is really the big lever for a lot of finance companies. [Loan terms] typically used to be 60 months, now you are seeing 72 to 84 months.”
Loan terms in auto finance have reached a high of 69.3 months in June, up 6.8% from five years ago, according to Edmunds.com data.
American Cycle Finance, for example, offers 18- to 84-month loan terms. However, 84-month loans are strategic for the company and only for new Harley-Davidson motorcycles, Ben Donnarumma, managing director of American Cycle Finance, said during a panel discussion.
Dealer Direct is willing to go up to 84-months for an “expensive” side-by-side vehicle, for example, Jon Vestal, the lender’s national sales director, said during a separate panel discussion. However, “we don’t like to do that,” he said, adding that 60 months is the preferred cap on loan terms.
“There is a lot more competition than the last few years in motorcycles and powersports, and you are seeing lenders do what they can to offer — within reason, of course — more affordable monthly payments to their consumers,” Landau said.
However, for leasing the terms remain in the 60-month range, where it will likely stay, according to panelists. “It’s all about managing servicing risk on lessee side,” said MotoLease LLC’s Managing Partner Emre Ucer. “If a day comes you have to take that collateral back, we want to make sure to have enough coverage. We want to design our programs in such way that after the first year, we have enough coverage for that. We prefer not to go above 60 months.”
“With a lender you have to move rate, down payment, or term to modify the payment,” added Speed Leasing’s Founder Hasham Malik. “I think Emre is right, as a lessor we are focused on depreciation.”