HANOVER, Md. — The 2010 Non-Prime Automotive Finance Survey results came out late last week and in a review of the data, SubPrime Auto Finance News discovered some interesting trends.

Some of the findings include that asset-backed securities funding is growing, market consolidation continues and collections can be the key to overcoming the economic turmoil.

Moreover, the National Automotive Finance Association in partnership with BenchMark Consulting International, which compiled and analyzed the information, discovered that captives are apparently continuing to struggle with funding, incentivized financing enters into the non-captive sector and credit unions tend to focus on the prime auto financing market.

Reviewing results, the study revealed that that stronger FICO scores, higher booking rates — especially on better-risk deals — and lower balances and LTVs with better rates are all helping to bolster improvement.

Additionally, "The shift toward longer contact maturities seems to have ended. New-vehicle financing is expanding, with some OEM programs available. Verification procedures are improving and risk-based. Risk models are being refined," according to officials.

Looking a bit closer, the NAF Association indicated that delinquencies and losses tended to be higher, but are "under control." Meanwhile repossession and bankruptcy losses continue to increase.

In another interesting trend, the association found that new-vehicle delinquencies and losses are not improving in line with used-vehicle results.

To complete the study, 25 companies were questioned, which is a record participation level. These companies were then broken down by class size, with small representing companies with up to 10,000 accounts, median accounting for companies with 10,001 to 80,000 accounts and large representing companies with more than 80,000 accounts.

The group broke down the FICO score bands as follows:

Super Prime: 720 plus

Prime: 680-719

Near Prime: 620-679

Non-Prime: 550-619

Subprime: 500-549

High Risk: Less than 500

No FICO

To offer an accurate picture of the industry, the NAF Association and Benchmark identified 175 players in the below-prime auto finance market. Of these, 25 companies participated, nine companies elected not to participate, 16 did not respond (possibly out of business), officials are uncertain of the status of 53 companies and microshops represent 72 companies.

New-Vehicle Trends

On average, companies who participated since 2007 had fewer accounts as of the most recent year's end, down 22.1 percent. Average outstanding principal balances were also down by 33 percent. Meanwhile, the median amount financed was down 4.6 percent.

Continuing on, the average loan to value ratio is down 7.7 percent from 2007 and the average dealer reserve is down 24.9 percent.

On the other side of the coin, median origination FICOs were up 1.6 percent, the average term by months was up 1.5 percent, and the average contract rate (dollar weighted) grew 4.1 percent.

Reviewing delinquencies, the results revealed that annualized 30-day delinquencies were up 23.8 percent, while annualized 30-day dollar delinquencies were up 32.9 percent. The annualized net charge-off rate soared 89.5 percent from 2007 and the average annualized repossession rate was up 33.7 percent.

Used-Vehicle Trends

On the used-vehicle side, the average number of accounts in the most recent year, compared to 2007, were down 9.2 percent. The median outstanding principal balances, meanwhile, were down 29.8 percent.

Furthermore, the study found that the average amount financed was down 6 percent, the average term by months was down 2 percent and the median loan to value ratio was down 4.1 percent.

The results also showed that the average contract rate (dollar weighted) was down 3.3 percent, while the average dealer reserve was down 23.3 percent.

Finally, the median annualized repossession rate is down 19.6 percent from 2007.

On the other hand, several key factors showed upswings, such as average origination FICO was up 2.1 percent, annualized 30-day account delinquencies were up 6.1 percent, annualized 30-day dollar delinquencies were up 10.3 percent and the annualized net charge-off rate was up 31 percent over 2007.

Overall Results

When questioning companies about originations, the NAF Association discovered that dealer faxes and dealer entry application portals led the way in application sourcing channels at 60 percent each. These were followed by proprietary systems and flow partners at 25 percent each. Then came consumers via Web and branches at 12 percent each.

Officials highlighted the fact that there was a reduced use of flow partners and increased sourcing of applications directly from consumers via the Internet.

Auto-decisioning use is, by far, the most popular with large companies at 38 percent, followed by all companies at 20 percent. Small companies came in at 17 percent and medium companies at 13 percent.

"For the large class, auto-decisioning was up, conditioning (or conditioned approvals) down (at 20 percent)," executives pointed out.

Conditioned approvals were the most popular with small companies at 43 percent, followed by all companies at 33 percent, medium companies at 23 percent and large companies at 20 percent.

Discussing originations further, officials said, "Small class originations were primarily Ford, General Motors and Chrysler makes. Medium class: Ford, GM and Chrysler origination mix was 18 percent below the combined groups' average. Overall, the Ford, GM and Chrysler mix was 18 percent higher than all other makes' mix."

Delinquencies, meanwhile, were down from last year across all FICO score bands and buckets, according to the study.

As for behavioral scoring, 70 percent of companies questioned indicated they do not use this device.

Thirteen percent of companies said these use behavioral scoring when 30 days delinquent, while 9 percent of companies indicated they use it at the next delinquency stage and 9 percent of companies said "other."

"This shows a decline compared to last year, with 70 percent of respondents not using behavioral scoring (50 percent of last year's respondents did not use behavioral scoring). This is an improvement opportunity for many finance sources," NAF Association officials stressed.

The association went on to find that the repossession account rate is the highest for small companies at 18.52 percent, 14.19 percent for all companies, 12.08 for large companies and 11.69 percent for medium companies.

"Overall, the average repo rates are up from last year, particularly in the small group," executives highlighted.

Meanwhile, the average net loss per repossessed account was $8,041 for medium companies, $6,919 for large companies, $6,641 for all companies and $5,082 for small companies.

"Overall, the average net loss per repo is up $168 from last year," officials noted.

Finally, the report reviewed remarketing trends and discovered that average unit costs were down 4 percent to 7 percent from last year in all categories.

More specifically:

Transportation

Large: $114

Medium: $202

Small: $140

All: $161

Reconditioning

Large: $140

Medium: $58

Small: $311

All: $174

Auction

Large: $165

Medium: $197

Small: $154

All: $172

Average Days to Sell

Large: 37 days

Medium: 35

Small: 46

All: 40

"Average days to sell was three to four days less than last year for all groups," executives pointed out.

For full results, the survey is distributed at no cost to most NAF Association members and companies that participated. For others, the cost is $300. Go to https://nafassociation.com/order_survey_2010.php to order.