Polaris Industries Inc. announced higher retail finance penetration rates in the first quarter of 2016, but the uptick was not due to a change in consumer credit quality, Mike Speetzen, Polaris’ executive vice president of finance and chief financial officer, said during an earnings call yesterday.
Polaris maintains “high standards” when it comes to its consumer credit quality, he said. “We work through several of our retail financing partners that are very strong, and we are not looking to expand the credit profile down into areas that are going to put us in a position for increased loss reserves.”
“The credit quality of our customers that go through our retail financing partners is maintained,” Speetzen said, “and we are not seeing an uptick in loss rates. Frankly, our retail credit partners are not interested in dipping down into those low Fico ranks to try and get the business.”
Polaris reported its income from financial services grew faster than total company sales in 1Q, due to the higher penetration rate. The income hit $19.5 million, a 33% increase compared to the same quarter last year.
The increased penetration was partially driven by new incentives to promote Polaris snowmobile sales, which “ultimately drove a fair amount of volume into our retail partners,” Speetzen said, and because Polaris “shares in the profits” with its retail finance providers, this led to an uptick in penetration.
Consumers financed approximately 31% of Polaris’ vehicle sales last year through Polaris’ combined retail finance providers, the company previously said in its 2015 annual report. Polaris currently has installment retail credit arrangements with Chrome Capital, FreedomRoad Financial, Sheffield Financial, and Synchrony Financial. The manufacturer also had a revolving retail credit arrangement with Capital One Financial Corp., which will not be renewed at the end of term due to lender’s gradual exit from the powersports industry.