LAS VEGAS — Powersports lenders are asking for a co-signer in an effort to strengthen subprime loan approvals, in the wake of a higher level of subprime consumers applying for loans this year, said Donal Hummer Jr., president and chief executive of ThunderRoad Financial.
With delinquencies risings and losses peaking this year in the subprime powersports finance space, lenders need more than a higher down payment, Hummer said at PowerSports Finance 2016.
“People don’t walk away from their own money, and a lot of times the dealers will try to help 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.”
Westlake Financial Services “loves” co-signers, especially if they are co-signers who share the same household, said David Goff, Westlake’s assistant vice president of marketing. “We believe having a co-signer is a lot better,” he told attendees. “We encourage it, and suggest it. It allows us to see the entire household, their buying power, and their debts.”
Co-signers do have an effect on delinquencies and losses, Goff said. Powersports is different than auto, in that the husband may want the powersports vehicle, but the wife does not. “When you have that type of situation, that can result in higher losses as well,” Goff added, which is why requiring co-habitating co-signers is key.
“Are delinquencies going to continue to rise a little bit? Yeah,” Goff said. “We are seeing lenders leave, we are seeing losses tick up, but I think if you are ahead of it and retool your program” — by requiring larger down payments, pricing deals properly, and getting a good co-signer — lenders can find success in the subprime market, he added.