LAS VEGAS — Delinquencies are rising and losses are peaking this year in the subprime spectrum of the powersports finance arena, said Donal Hummer, president and chief executive of ThunderRoad Financial.
“We’re seeing what I call a lot of ‘really ugly subprime’ through this last year, and we’re actually amazed that these people are getting credit anyplace,” Hummer said at PowerSports Finance 2016 last week. “But they actually are finding some people to loan to them.”
However, he added that equity — a larger down payment — is key for subprime consumers, the Reno, Nev.-based lender’s primary customer base. “People don’t walk away from their own money, and a lot of times the dealers will try to help, either with a discount on the deal,” he added. “And that will actually help mitigate our losses, but it really doesn’t strengthen the deal. So we try to encourage the customer to get a co-signor, for example, but this year it’s just been hard to do.”
Delinquent consumers may walk away from $500 down payments, but are much less likely to walk away from $2,500 or $3,000 down payments, said fellow panelist David Goff, assistant vice president of marketing and powersports relations at Westlake Financial Services.
“Getting that down [payment] from the customer is huge, but it’s also making sure that the rebate is not being employed as down [payment] because that is a false down,” Goff added. “A customer has no ties to that rebate, that’s just free money for them.”