GAINESVILLE, Ga. — With so many different makes and models
within a single vehicle segment available nowadays as well as how finance
companies are buying contracts lower down the credit spectrum, Black Book
Lender Solutions wanted to provide some updated depreciation guidance and
recommendations.

This week, Black Book released a white paper titled, "Lender
Solutions White Paper: Not All Vehicles Depreciate Alike." Jeff Bunch, vice
president of Black Book Lender Solutions, explained to SubPrime Auto Finance
News why the analysis contained in the document is arriving at a crucial time.

"As we look at what's going on in the industry right now as
some of the numbers in the paper show, the aggressive lending is getting back
to levels very close to where we were back in 2008. They're a lot more
aggressive in the subprime piece," Bunch said.

"It's important that as we grow back to the numbers we saw
in 2008 that the lenders look and don't make the same mistakes that were made
back in 2009 as far as not paying attention to the depreciation rate on all of
the different cars in their portfolio," he continued.

Beyond, an explanation of the current landscape with heavy
emphasis on today's competitive atmosphere and strong focus on subprime
programs, Black Book highlighted the other elements analysts discuss in the
white paper, including:

—Understanding how historical collateral trends, in addition
to current valuation patterns can help with better forecasting of values for
portfolio growth.

—A look at specific examples where two vehicles within the
same segment depreciate at drastically different levels and at different time
intervals, and how this could impact an auto lender.

—Insight into today's auto lending process, which goes
beyond originations to also include refinancing, remarketing and collections.

—Details of varying time intervals of when a vehicle enters
a lender's portfolio, and how two vehicles at different intervals can impact
the portfolio.

"The point of this paper is to show that not every car is
the same. You can't clump them all together," Bunch said. "You've got to look
and see as far as the age of the car at the origination point to see what
really has taken place so far with that car so you can tailor your lending
appropriately and how aggressive you want to be, how far out month wise you
want to go, how aggressive you want to be on your LTVs and how do you want to
price it."

While Bunch pointed out that watching depreciation
developments are important at the time of origination, he emphasized how
finance companies need to keep tabs on these metrics if refinancing or
collections arise, too.

"It all ties into the element of profitability; where you're
at in that point time," Bunch said. "Whether it's a refinance or collections, lenders
need to know where they are from an equity standpoint and what the exposure is as
to whether to refinance or, in collections, you try to work with the customer.

"It's being able to measure at any point in time where you're
going to fall on the equity scale and what's your exposure," he went on to say.

Bunch insisted Black Book has all of the resources to back
up the conclusions analysts made in the white paper and how the firm can
provide as much data as finance companies need to keep their portfolios
healthy.

"Fortunately we've got a long history and a lot of
historical data. With all of the information we receive on a monthly basis from
all of the auctions, all of the online pieces and with the editorial staff
looking at it, we have a pretty good gauge on what's taking place with each of
the cars," Bunch said. "We drill down all the way to the trim level so we have
a pretty good idea of how each and every model is performing as far as
retaining their value.

"With our residual forecasting as well, we have a pretty
good idea of what's going on with the models that are coming out and what the
economy is doing. We're able to do a good analysis of what going to take place,"
he continued.

And when you add the loan portfolios Black Book accesses as
well, Bunch declared that, "It's a lot of information but when you put it all
together, it can tell a real story."

To obtain the white paper, contact Black Book Lender
Solutions at (855) 371-7532 or visit www.BlackBookAuto.com/lender-solutions.

Bunch will be one of the host of executives and industry experts who will be participating in the inaugural SubPrime Forum, the newest edition to Used Car Week. The SubPrime Forum, which is being orchestrated in conjunction with the NAF Association, is set for Nov. 12 and 13 at the Manchester Grand Hyatt in San Diego. More details are available at www.usedcarweek.biz.

Nick Zulovich can be reached at nzulovich@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.


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