There is a lot of missed marketshare opportunity in preowned financing, said Jim Woodruff, chief operating officer at National Powersport Auctions, however, the financing of used powersports vehicles can actually be less risky to the lender, he added.
In general, a new vehicle has a warranty backed by the OEM, which takes much of the risk away from financing a powersport vehicle, he told Powersports Finance. However, as soon as the vehicle is off the dealership lot, it depreciates quickly.
“Used vehicles may or may not have warranty left, and it has miles and may have issues — it’s unknown,” Woodruff said, which is why lenders view preowned vehicles as risky. “On the flip side, it’s not going to depreciate nearly as much, from a residual value perspective, it’s almost a safer bet. If the loan goes bad, then the financial risk to institution could actually be less.”
For a new vehicle, if the loan goes bad, the institution could “take a bigger hit,” Woodruff said. Additionally, manufacturers have been producing “great units of high quality,” and many units can “last for a decade,” he said.
While there are lenders in the space who offer preowned financing, it’s a “thin slice” of the market, Woodruff said. The ratio of new powersport vehicles being sold or registered in the U.S. versus preowned is about 3 to 1, he said, yet lenders are not financing three times as many used vehicles as new.
The preowned finance programs out there “are not for everybody” because the programs are not necessarily “all encompassing,” he said. For example, some lenders only offer preowned financing on certain product types or for certain credit profiles.
Woodruff will speak on the Analyst Panel entitled “Where the Customers Are: An Inside Look at Vehicle Demand” at the upcoming PowerSports Finance 2016 conference. During the Oct. 5 session, Woodruff and his fellow panelists will discuss segment-by-segment valuations and trends, including an update on repossessions, how to master seasonality, and today’s hot vehicles. Woodruff will be joined on the panel by Lenny Sims, chief of business development at NADA, and Scott Yarbrough, editor of Black Book Official Motorcycle and Powersports Value Guide.