A potential subprime downturn in auto finance could prompt smaller lenders to exit the powersports space, said Paul Kramarz, director at PricewaterhouseCoopers LLP. The powersports finance market is “definitely not immune from a recession,” despite continued year-over-year industry-wide growth, he added.
The risks associated with powersports financing often “weigh heavier” because many consumers are less likely to pay on a recreational vehicle than on a car, Kramarz said, but “on the flip side, powersports lending — for the most part — is tighter than auto, so performance is expected to fluctuate.”
For now, the powersports industry is experiencing growth, and with that comes new-entrant lenders — such as Ride Today Acceptance, among others — and amped up competition.
“With all the smaller people jumping in, it’s more competitive again,” Nic Spallas, chief executive at Capital Recovery Group LLC, told Powersports Finance last month, but warned that the industry is still very cyclical. Smaller lenders tend to “pop up, flurry around, then teeter out,” he added.
“More competition is always a cause for concern, but for the most part this is very typical,” Kramarz said. “As things get good, new money and new capital enters the market. Typically, when the next downturn hits, a lot [of lenders] will go out of business and the strong will survive.” The stiffer competition will vary based on what end of the credit spectrum the lender serves, he added.