Fair to Close Funding Round, Secures Offers for Nearly $1 Billion in Capital


Fair — a used-car, no commitment leasing app — is closing a strategic funding round for an undisclosed amount and has additionally secured offers for nearly $1 billion in capital from a group of institutional investment banks, the company announced today.

The funding round was led by BMW i Ventures, and includes investments from other strategic investors such as Penske Automotive Group, according to a company press release.

Fair’s flexible-ownership solution offers a “strategic investment opportunity for manufacturers like BMW,” because the model can benefit dealers like Penske Automotive Group as well as customers, according to the release.

“The Fair model relies on dealers as ongoing operational partners, which is why it made sense as an investment for Penske,” Scott Painter, Fair’s co-founder and chief executive, said in the release. “Penske’s physical infrastructure will serve as a foundation to enable Fair’s flexible model.”

Separately, Fair secured $1 billion in capital from a group of undisclosed investment banks that traditionally back auto debt portfolios. The secured offer comes from an entity led by Sherpa Capital that is being set up to fund innovative transportation models like flexible ownership and ridesharing, according to the release.

Fair, which launched in early September, allows customers to shop for a car based on a prequalified monthly payment range tailored to the borrower’s budget, and includes the flexibility to walk away from the vehicle with only five days’ notice.

Unlike a traditional loan or lease, “We are not trying to qualify consumers based on their credit score; we are using their affordability index to determine how much they can afford to pay,” Painter told Auto Finance News back in September. “We then also benchmark what folks like Dealertrack and other platforms would put the consumer into with an indirect loan. … We are actually doing the math behind the scenes on what you would be able to finance for the car you are looking for, down to the monthly payment, and we give a guarantee.”

Scott Painter (left), Fair co-founder and chief executive; and Georg Bauer (right), Fair co-founder and president, visited the Royal Media Group office last week to demo their new business model. (Photo by William Hoffman)

Fair is available in the greater Los Angeles area and will be rolling out to the rest of California by yearend. The startup also plans to expand to other select markets across the U.S. — likely starting with Texas and Midwestern states — in 2018, Georg Bauer, Fair’s co-founder and president, previously told AFN.

“In addition to Fair’s obvious benefit for customers, we believe our app will be a critical tool for dealers handling the rising flow of high-quality lease returns we expect over the next several years,” Bauer said in the release. “Enabling this process with digital capabilities creates an amazing opportunity for consumers, and helps build brand loyalty for automotive brands.”

Bauer will present a session entitled “The Mobile Landscape in Big Auto” at the 17th annual Auto Finance Summit, which will take place Oct. 25-27 at the Wynn Las Vegas. In Bauer’s session, he will offer an overview of traditional auto finance consumer best practices, how auto finance success limits incentive for mobile innovation, and provide examples of incremental digital offerings — and why the future demands more.

Other sessions at AFS include: Economic Trends in Auto Finance, Practical Compliance Lessons, Strategies for Enhanced Dealer Relationships, and Default Management: Strategy & Methodology. To learn more or to register, click here.



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Automotive Equipment and Tools For The Automotive Industry

The automotive equipment industry deals with the production of every kind of tool and machinery that is needed for the manufacture, maintenance and repair of vehicles including cars and car parts. As such, the industry produces several different varieties of equipment starting from basic hand tools to more complex machinery.

Different Kinds of Automotive Equipment

Automotive workshops and garages will be unable to function without automotive equipment. Shop furniture, lifts, exhaust hoses, air compressors, lubrication equipment, electric and light reels, jacks, vehicle servicing equipment, fluid storage tanks and trans-air piping are some of the many different types of automotive equipment that are used by automotive manufacturing and automotive repair businesses.

Common Types Of Automotive Equipment

* Hand Tools: Automotive repair shops use several different types of hand tools for their repair and maintenance projects. Some of the commonest items include ratchet sets and wrench sets, crowbars (also known as pry bars), socket sets, screwdrivers, star and clutch-head drivers, hammers, pliers and wire cutters, electric drills, hacksaws and torque wrenches.

* Pneumatic Tools: Most automotive workshops now use pneumatic tools as an alternative to electricity powered motors because the latter is more prone to fire hazards. Such tools are powered by compressed air and are high powered versions of the more traditional hand tools. Common examples of pneumatic automotive equipment include air compressors that can be used to power a variety of tools including hammers, drills, ratchets and spraying tools.

* Availability of pneumatic equipment makes it easier for mechanics and technicians to undertake repair and maintenance work because they are powerful and easy to use. For example, a set of pneumatic shears can cut through sheet metal at a faster rate and leave behind a smoother edge when compared to traditional tin snips. Similarly, air hammers outfitted with chisel or punch bits have multiple uses. They can they be used for straightening dents. The chisel feature can be used to break rusted parts loose and the punch bits can be used to remove old rivets and bolts that are too difficult to take out by hand.

* Lifts: several different kinds of lifting equipment are used to lift and secure cars so that mechanics and repair persons can easily work under the vehicle. These lifting tools include both low-tech tools such as basic floor jacks, car ramps and jack stands as well as hydraulic lifts and floor jacks for better efficiency and performance.

* Vehicle Exhaust Removal Systems: vehicle exhaust removal systems are used to capture and remove harmful exhaust fumes to insure optimal air quality in automotive maintenance and repair facilities. These are mandatory equipment as per OSHA Standards in order to limit exposure to harmful vehicular emissions. Common vehicle exhaust removal systems include hose drops as well as reels.

* Lubrication Systems: Automotive lubrication systems include several different types of oil meters, ATF meters, gear lube meters, dispense valves and grease dispenses valves.

The Automotive equipment business is a very large and competitive business. Automotive repair businesses must buy equipment from reputable dealers for the best deals and performance levels.



Source by Aurelia Lucy Dudley

Wells Fargo’s Forced-Insurance Compensation Was ‘Insufficient,’ OCC Finds


The Office of the Comptroller of the Currency found that Wells Fargo & Co.’s previous $80 million payout to consumers affected by its force-placed insurance scandal was “insufficient,” according to a document that was leaked on Friday that widely criticized the lender’s practices.

Although the OCC report — which was leaked to The New York Times — does not detail additional fines or penalties on the bank, it does lay out a series of violations and says that the bank may have to pay out “substantially more” to the victims.

In July, The Times first reported the problems at Wells Fargo and the next day the bank proactively reimbursed consumers who were harmed by its practices. Wells Fargo’s internal review found that hundreds of thousands of consumers had been charged for collateral protection insurance, when the consumer did not need the coverage.

This force-placed insurance product automatically charges consumers for comprehensive and collision coverage if they have not already purchased it from an outside source. The review revealed that 800,000 consumers had been wrongly charged for the coverage sending 274,000 borrowers into delinquency, and led to 25,000 wrongful repossessions. Yet, Wells Fargo disputed those findings and only provided compensation to 500,000 consumers.

Now, this latest report from the OCC has found that Wells Fargo has not set aside enough money to properly reimburse those customers that it has identified, nor did the money sufficiently cover all those consumers impacted.

Wells Fargo’s reimbursements only covered a period from January 2012 through July 2017, but the CPI program has been in place since 2005 and the OCC found that the bank did not calculate payments for much of that period.

The OCC also found that the bank used “an overly complicated reimbursement methodology, which lacked clear support for addressing all the customer costs incurred,” according to the report.

AFN previously reported that the OCC and Consumer Financial Protection Bureau were investigating the bank’s auto insurance practices, but this report also adds the Federal Trade Commission to the list of interested regulators. When the bank first originated these loans it hid the cost of the insurance within the monthly payment, which may be a violation of the Federal Trade Commission Act prohibiting unfair or deceptive acts in commerce, according to the report.

“There is an ongoing remediation to make things right for customers who were negatively impacted,” a Wells Fargo spokeswoman told Auto Finance News. “We have hired new leaders in our auto lending business and have made significant changes over the past several months to strengthen controls and vendor oversight. We are also working to enhance our customer care program and improve complaints resolution. We will continue to work with regulators on the remediation and will make improvements to our auto lending business to build a better Wells Fargo.”

National General was Wells Fargo’s CPI provider and the report details the bank’s lapse in oversight over the vendor. Wells Fargo auditors discovered the customer complaints back in 2015, but the OCC found that Well Fargo did not act promptly to address those complaints. The bank stopped placing CPI policies in September 2016.

Finally, the report deemed Wells Fargo Dealer Services’ compliance management program as “weak,” given that the bank identified the auto department as low risk in 2015.   



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Santander’s $1.5 Billion ABS Includes New Underwriting Exceptions


The Bull

Santander Consumer USA’s latest securitization of deep-subprime auto loans is the first ABS to include originations under the lender’s new underwriting exceptions policy, according to a presale report by Moody’s Investor Service.

The $1.5 billion transaction — Drive Auto Receivables Trust 2017-3 — is Santander Consumer’s (SC) third securitization of deep-subprime auto loans this year.

SC recently changed the way underwriting exceptions are reported. “Under some circumstances, contracts may be approved that are exceptions to both the credit underwriting policy parameters and the global limits,” Moody’s said in the report. Global limits are credit factors, such as maximum LTV and maximum term. A contract which exceeds a global limit at origination is now considered an exception to SC’s underwriting guidelines.

Previously, only loans that were exceptions to the credit underwriting policy parameters — and not global limits — were reported as exceptions. “As a result of this change, 0.96% of the loans in this pool are exceptions, while under the old policy only 0.20% of the loans would be considered exceptions,” according to the report.

The 2017-3 pool’s weighted average Fico of 566 is slightly lower than 2017-2’s 568 and 2017-1’s 570. The weighted average original term of 71 months is on par with 2017-2 and 2017-1, which were 72 and 70 months, respectively. The ABS is comprised of 34% new and 66% used vehicles.

Additionally, SC recently brought its delinquency policy for Santander channel loans into alignment with its delinquency policy for Chrysler channel loans. For loans originated through the Santander channel on or after Jan. 1, a borrower is required to make at least 90% of the monthly payment amount to avoid delinquency, whereas before for the SC channel a borrower was required to only make 50% of the monthly payment amount to avoid delinquency.

“The change in delinquency policy for Santander channel originated loans could impact whether an obligor becomes delinquent and also when the obligor becomes delinquent,” the report states, adding, “under SC’s customary servicing practices, any obligor who makes a partial payment large enough to avoid delinquency in month one must make a payment that is 100% of the monthly payment amount to avoid entering delinquency beginning in month two.”

Therefore, if a person paid 50% of their total payment in month one, he or she would be obligated to pay 150% in month two, whereas the new policy requires 90% of the payment in month one and only 110% in month two. Approximately 88% of the collateral in the 2017-3 pool was originated in 2017.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Need-To-Know Facts About Convertible Cars

Convertibles are defined by having a retractable roof – they represent the wind-in-your-hair dream car designed for pleasure over practicality.

While previously convertibles were purely two-seater sports cars which were also broadly called roadsters, these days you can even find open-air sedan type models. Most convertibles fall within the luxury-range of vehicles, however there are also several affordable models now on the marketplace.

There are two main types of convertible cars, distinguished by their roof type – soft-tops and hard-tops. A soft-top convertible is also known as a cabriolet, cabrio, or spider, and hard-tops are variously described as coupé cabriolets, coupé convertibles or retractable hard-tops.

The following guide will give you some of the key facts about convertibles to keep in mind so you can decide which model is right for you.

Size

As mentioned above, convertible cars range in size from two-seat roadsters to roomier four-seaters. Even if the vehicle seats more than two however, while there are some models which have normal space for adults in the rear of the car, the majority have only enough room for children or pets.

When it comes to cargo space, convertible cars are limited by the roof top being folded down. With the top pulled up however, some models offer a decent amount of cargo space. The best way forward to gage whether you’ll have enough room for your needs is to make sure you have a look at the boot space with the roof in both an up and down position when shopping around.

Roof Type

Soft-top canvas convertibles used to be the original standard, but both canvas and vinyl covers are prone to damage if not looked after carefully. Currently car manufacturers are releasing an increasing range of hard-top convertibles which feature automatically powered retractable roofs that break into two or three pieces and then elegantly lower into the boot. While these are more durable, crime proof and easy to operate, their complexity can often reflect in the price, they add more weight to the vehicle and they also take up more boot space. Modern soft-tops have been improved with multiple layers that protect the car from the elements and reduce noise just as well as hard-tops.

Engine Capacity

Generally, most mid-sized convertibles use four- and six-cylinder engines, while pricier luxury models mainly use powerful V6 or V8 engines.

Fuel Consumption

Four- and six-cylinder convertibles are able to achieve a good combined mileage in the low-to-mid-20-mpg range, but most eight-cylinder models deliver less than 20 mpg.

Safety

Modern convertibles usually feature a fixed or pop-up roll bar to protect the passengers if a rollover accident occurs.

It must be said that most convertibles have small rear windows, which creates large blind spots. If you’re extra vigilant about safety, you’ll ideally want to go for models that offer blind-spot warning systems, parking sensors and rear view cameras.

Premium-brand convertibles will have side airbags that deploy from the seats as a standard, and it’s a good idea to choose this as an extra feature on a less expensive drop top. Look out for airbags that extend upward to protect the head, since convertibles don’t have the protective side curtains that solid-roof vehicles provide.

Top Extra Features

Extra features to consider that will make your driving experience even more luxurious include automatic climate control, heated seats, navigation systems, keyless start-up systems, Bluetooth and an iPod interface. Other additions that can make all the difference are built-in wind deflectors, heated and cooled seats and sun-reflective leather upholstery.

Another factor to think about is that in most convertibles the rear is very compact, so features which make access easier come in very handy. These include front seats that automatically return to their previous position and seatbelts that move out of the way for rear passengers but are still easily accessible for the driver.

Conclusion

Convertible cars are without a doubt one of the top choices you can make when it comes to pure enjoyment while driving. And with larger models increasingly being released, now you can combine a let-your-hair-down sporty feel with the space capacity of more practical vehicles.



Source by Anthony Blascara

U.S. Bank Originations Climb 4.7% Amid Continued Focus on Prime


U.S. Bancorp grew its auto originations 4.7% year over year to $18 billion, driven by “high-quality originations in the indirect channel,” the company disclosed in its third-quarter earnings report.

“We do have levers in the prime space and that continues to give us loan growth regardless of what’s going in the macro-economic environment,” Terry Dolan, U.S. Bank’s vice chairman and chief financial officer, said on the earnings call.

U.S. Bank deals mostly in the prime spectrum with a weighted average Fico score of 779 through its indirect channel and 748 through its direct channel. Most of the bank’s loans — 95% — were done through indirect channels, while the remaining 5% were through the direct channel.

Back in April 2015, U.S. Bank made a strategic shift toward originating more prime and super-prime loans. Additionally, U.S. Bank has been cutting back on its 84-month loan offerings since April 2015.

However, the Minneapolis-based bank was not immune to the industry-wide trend of rising delinquencies. The company saw an uptick in 30-to-89-day delinquencies to 0.89% of the total auto portfolio compared to 0.59% during the same quarter the year prior. Also, charge-offs rose to 0.40% of the total auto portfolio, up from 0.32% compared to the previous year.

But the uptick is not attributable to the hurricanes, Dolan said on the call, adding that it’s too early to see how much the storms will affect delinquencies and charge-offs.

“We have been putting programs in place for reaching out to [affected] customers and providing loan modifications,” he said. “The increase in auto [delinquencies and charge-offs] is seasoning and the fact that those portfolios have grown fairly significantly over past few years, so it’s just natural seasoning. They are performing at our expectations.”

John Hyatt, the bank’s executive vice president of dealer services, will speak on a panel entitled “Practical Strategies for a Post-Peak Market” at the upcoming Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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GM Financial Supports Growth With New Texas Service Center


GM Financial’s San Antonio Service Center

General Motors Financial Co. is hosting a grand opening event on Thursday for its San Antonio service center, which will house up to 700 new jobs in the region, the company announced in a press release.

The 100,000-square-foot facility has already added 200 jobs in the area, joining the other 8,000 employees GMF employs across its 17 credit centers in the U.S. and Canada. GM Financial is headquartered in Fort Worth and has another service center in Arlington, Texas.

“We are excited to celebrate the grand opening of our San Antonio Service Center, which expands our economic and employment presence in the state of Texas,” Dan Berce, president and chief executive of GM Financial, said in the release. “Along with our parent company, General Motors, we are proud of our long history in the state, where together we employ more than 11,000 people, all committed to building and financing some of the best vehicles in the world.”

The growth in staffing is in line with the company’s increased originations. GM Financial posted year-over-year retail loan origination gains of 87% and 62% in the first and second quarters, respectively. Leasing gains were more modest with a 4.3% increase to $6.8 billion in the second quarter, compared with the same period the year prior.  

Hear more from Berce during a fireside chat at the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Your Car Trade-In Pay-Off – Understanding How It Works!

It’s very easy to get confused about how the pay-off is handled in a car deal. Almost everyone who trades a car into a car dealer on a new purchase has a pay-off on their trade.

The pay-off is how much you owe the lender for your trade. It in no way reflects how much your trade-in is worth, and most often the pay-off is higher than your trade-in’s actual value.

When you buy a vehicle this is how the numbers break down:

Selling price of the new vehicle

+ Any Add-ons like extended warranty, protection package, etc.

+ Sales tax, title, documentation and registration fees

Trade-in allowance

Cash down and rebates

+ Pay-off on trade

_____________________

= Total Amount Due

Now adding the pay-off back on to the “Amount Due” tends to throw a lot of people for a loop! They have a hard time understanding why the pay-off has to be added back on once the dealer agrees to a trade-in figure.

You must remember, the loan on the trade-in is yours — not the car dealers — and it must be paid off so the dealer can get a clear title to the trade-in. In essence, the car dealer is buying the trade-in from you, and you can’t sell it to him if there is an outstanding balance owed on it. So the pay-off gets added on to your “Amount Due,” and then the dealer takes that money and pays off the loan. The lending institution in return sends the car dealer a clear title and everyone is happy.

Remember, the pay-off is your responsibility not the car dealer’s. The dealer is actually doing you a service by simplifying the way you pay off your vehicle. It also allows the dealer to control the process so they don’t get stuck with a trade-in that has a lien and an outstanding loan on it.

Now having said that, remember that most car dealers are honest and do business in a legitimate way, and they will pay off your outstanding loan promptly, or as soon as they get the funds on the car deal. It’s to their benefit to pay it off right away so they can then sell the car. If they don’t have a clear title for the vehicle they can’t legally sell it.

However, there have been occasions when a car dealer waits to make the pay-off, or in rare cases doesn’t pay it off at all. This is illegal and can get a dealer in a lot of trouble, but sometimes they are having cash flow problems or, in very rare cases you come up against a crook.

If the car dealer doesn’t pay-off you loan within a reasonable amount of time (one to three weeks) the lender is going to be looking for you to make a payment when it comes due. I have even seen cases where the customer didn’t know for several months that the pay-off hadn’t been made, and it was actually causing late payment entries on their credit report.

Remember . . . I said this was a rare occurrence, so don’t panic if you have a trade-in with a pay-off. There are steps you can take to protect yourself. If you trade a car with a pay-off get a written statement from the dealership signed by either the Sales Manager or the Finance Manager stating that they will in fact pay off your trade-in, and by what date. The statement should include the following information:

  • The date of the document
  • The amount of the pay-off
  • By what date will the pay-off be made by
  • How long the pay-off amount is good for (because the amount changes as interest accrues)
  • The year, make, model, mileage and serial number of the car being paid off
  • The name and mailing address of the lending institution
  • The name of the person at the lending institution who verified the pay-off amount
  • The signature of either the Sales Manager or the Finance Manager

Any reputable dealership should be happy to accommodate your request for this form. In fact, a professional dealership will have such a form as a routine part of their paperwork.

This way if anything goes awry you have something in writing to protect yourself, and to prove the car dealer agreed to make the pay-off. As I said before, most dealers are honest, but it’s always a good business practice to protect yourself.

If a dealer refuses to give you a written statement on the pay-off you should not complete the deal. To me this would be a big red flag! Go do business with another car dealer who will accommodate your request. There are too many honest car dealers out there for you to waste your time with a questionable one.



Source by Tony Iorio

Bank of America Grows Prime Portfolio 6% in 3Q


Via Shannon Clark/ Flickr

Bank of America grew its auto portfolio by 6% year over year in the third quarter, despite rising charge-offs across the industry and an increasingly competitive prime marketplace.

Average auto loans and leases outstanding climbed to $52 billion in the quarter, compared with $49 billion during the same period the year prior, according to the bank’s earnings on Friday.

The lender remained a leader in prime credit quality during the quarter. Experian said Bank of America is the No. 1 originator of new loans to consumers with a Fico score of 740 or higher as of July, according to the report.

Because the bank doesn’t take on much risk in its auto portfolio, analysts have questioned whether the bank can continue to grow in an environment where lenders are fleeing subprime for prime and super-prime credit. Chief Executive Brian Moynihan said this quarter shows that the company can.

“The auto standards have always been high, we’ve always made that a business that we took very little credit risk in,” he said on the call. “The debate has always been, can you grow [with that low of credit risk]? And the answer is, yes. But you’ve got to grow in a rational, responsible basis, and that’s what’s playing out for us this quarter relative to other people.”

Charge-offs and delinquencies have been rising for nearly every auto lender in the space for the past few quarters, but Moynihan said he’s not concerned about the losses in Bank of America’s portfolio. While the lender does not break out specific auto losses, charge-offs were down overall across the bank’s various consumer credit categories, particularly in non-credit card categories.

Bank of America Dealer Financial Services launched it’s own direct lending portal at the start of 2017, which has likely contributed to the increased portfolio. However, it’s unclear how much volume the bank has originated through the service to date.  

David Hollodick, senior vice president of consumer vehicle lending and product executive for the bank’s dealer financial services division, led the bank’s direct lending push and will discuss trends in direct lending at the 2017 Auto Finance Summit, which runs Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Heritage Navigates ‘Growing Pains’ From Surge in Originations


Heritage Acceptance Corp. is still recovering from a greater-than-expected surge in loan originations last year, Vice President of Sales and Marketing Mike Monaghan told Auto Finance News.

Heritage Acceptance began 2016 with the goal of boosting originations, but the lender did not expect the volume it received, Monaghan said.

“Our goal last year was to ramp up originations,” he said. “We were surprised with the response. We grew both vertically and horizontally,” meaning Heritage was receiving more applications from its current dealer base and signing more dealers.

While Monaghan declined to offer a growth percentage, he said the surge stemmed from the lender’s focus on franchise dealers. “We grew very, very fast last year, and we had a lot of growing pains,” he said. “We are trying to figure out the staffing for the volume we want to get,” he said, referencing that the company did not have enough people on staff to handle the volume.

Heritage’s “renewed focus” is to balance volume yield with staffing growth to service the new business, he added. Elkhart, Ind.-based Heritage Acceptance originated 263 loans in December 2016. It makes loans for a network of 600 dealers in five states.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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