NPA: Default Rates Expected to Tick Up in 2017

aimexpo-banner-2ORLANDO — Default rates are expected to rise going into 2017, particularly as new lenders continue to enter the space or increase their financing volume, Jim Woodruff, chief operating officer at National Powersport Auctions, told attendees at the AIMExpo last week.

However, default rates are at all-time lows currently, Woodruff said. The powersports finance industry is experiencing some “real nice, positive changes,” he added, including new finance sources.

For example, Yamaha Motor Corp. launched its retail finance captive, Yamaha Motor Finance Corp., in March 2015, Wells Fargo & Co. completed its acquisition of Commercial Distribution Finance in March of this year, and Polaris Industries Inc. and FreedomRoad Financial partnered to launch Performance Finance in September, Woodruff recapped.

cvenq34wyaaoe5sWith no official default rates reported for powersports, NPA compares several consumer metrics — auto, first mortgage, second mortgage, and bank card default rates — along with NPA repossession volume and data, to show a correlation to powersports, Woodruff said.

“What we found was that in the powersports segment, powersports paper tends to perform like a blend of bank cards, second mortgage, and auto defaults,” he said. The correlations show that powersports default rates are still low.

However, “with more subprime paper coming in, that rate is going to go up,” he said. “It should be up anyway.” Lenders should be taking more risk, and dealers should selling more vehicles as a result, he added.

“So what’s going to happen out in the future?” Woodruff asked the crowd. “It’s kind of hard to tell. The leading indicators are unknown. But I expect, and I would like, defaults to go up in powersports, because I think that is a sign of healthy lending.”

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