Capital for the LHPH Industry

Creating financial flexibility one dealer at a time

Lease-Here, Pay-Here a Counter-Cyclical Program for Dealers

Trevor Watson | November 18, 2019

According to the New York Federal Reserve’s Quarterly Report on Household Debt and Credit, auto loan and lease originations increased 1 percent overall in the third quarter of 2019.  However, the weakest performance for the quarter came in subprime originations totaling $30.15 billion, down 7.4 percent from the year-ago quarter.

“This was the first negative year-over-year comparison for subprime originations after four straight quarters of year-over-year gains,” according to Automotive News.

https://www.autonews.com/finance-insurance/auto-loan-lease-originations-grow-q3

As subprime losses accelerate in the ABS market and large market share subprime lenders, such as Santander Consumer USA, see defaults exceed Great Recession levels, subprime auto lenders are tightening credit standards and even pulling out of the market all together.

https://www.dallasnews.com/business/autos/2019/10/25/dallas-subprime-auto-lenders-loans-souring-at-fastest-clip-since-2008/

The vacuum left by the retreat of subprime finance companies in the auto space is an incredible opportunity for LHPH dealers.  First, the pool of subprime customers that can not qualify with traditional lenders grows, which translates in to more deals for LHPH dealers in general.  Secondly, LHPH dealers begin to capture the business of customers who are closer to the near-prime or non-prime credit segments, as opposed to the deep subprime customer LHPH dealers have been financing for the last 6-7 years.  The result is both an increase in originations volume and an improvement in their overall portfolio performance, resulting in greater profitability.

For those who have been considering building their own Lease-Here, Pay-Here platform, now is the perfect time to enter the space.  It is a counter-cyclical program well suited for today’s market.  To learn more about how to launch your LHPH business, download our free E-Book here.

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