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Author Topic: Car refis

j
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Car refis
OP: October 24, 2016, 11:00:00 PM
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R
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Car refis
#1: October 24, 2016, 11:00:00 PM
Since this is a new product launch LC will initially fund the loans themselves on their balance sheet.
Wonder if it will be possible to know if LC is ONLY putting these new auto loans on the books, or if they are also putting some of the old existing style loans there as well. How much cash did they have last quarter; $80M or so IIRC? LC's next quarterly report should be interesting.

Also, there is no origination fee for the new auto loans. The "Marcus effect"?.
How is that going to work? Lenders pay LC the "origination" fee (which LC obviously must pass through to the borrower via a higher APR)? Could this "no fee" approach work itself back into LC's approach to existing style loans?
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Car refis
#2: October 24, 2016, 11:00:00 PM
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T
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Car refis
#3: October 24, 2016, 11:00:00 PM
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Car refis
#4: October 27, 2016, 11:00:00 PM
Not exciting, to me, personally, but probably will do a lot of originations.  Backend servicing on these, if can be well automated (pun!), is ripe for being dragged into the late 20th century - dragging it into present day could be exciting, but fraught with scale/execution risk...

I'd have rather seen mortgages.  Guess I have to wait.  Ohwell.
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r
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Car refis
#5: October 27, 2016, 11:00:00 PM
There is always next announcement!  The no origination fee is interesting to me.
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S
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Car refis
#6: October 27, 2016, 11:00:00 PM
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T
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Car refis
#7: October 28, 2016, 11:00:00 PM
It is my understanding that the car loan business is presently very competitive, ie crowded.  It therefore seems a curious place to enter.  I suspect that LC's plans were laid a couple of years ago and this project is just now coming into view.

I have for many years owned stock in Nicholas Financial, a small company (balance sheet lender) that specializes in car loans.  Here are some words from their most recent quarterly report  http://www.nicholasfinancial.com/PressRel/pr179.htm
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T
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Car refis
#8: October 28, 2016, 11:00:00 PM
I glanced briefly at the Nicolas Financial 1st quarter results and something stood out to me: Weighted APR is 22.39% for the 3 months ending as of June 30th. The info we have received from LC is that their program is going to target interest rates ranging from 2.49 per cent a year to 19.99 per cent. If that is true, I would imagine the weighted interest rate is somewhere in the middle, say 12-13%.

Based on just interest rate alone, I think that LC is targeting a much different credit profile with their auto refinancing program than what Nicolas Financial is going after. I think it is also smart for LC to go the refi route first. If they can capture customers who have already have a decent history of payment, thus reducing likely defaults, and who also an asset that is relative intact (<7 years old and < 80,000 miles), they will have a winner.

Defaults are really killing me right now. I'm still getting a healthy return (not what I initially expected, but still okay), but I've maxed out my IRA contributions and so the tax implications of net interest minus charge-offs are really starting to drag down my total return. I have the feeling that an asset backed loan would boost overall returns when taxes are accounted for.
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f
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Car refis
#9: October 28, 2016, 11:00:00 PM
If my understanding is correct, these will not be available to retail on LC for around 2-3 years?
Is there a market for retailers who are fine with returns maybe as low as 5%?  Or lower?
I am pretty sure I missed where LC makes their money on this.  How is that factored in with no origination fees?
As far as getting into mortgages down the road, would not see as high-interest rates as can be expected in auto refinances, right?

I am fine with LC tossing the initial onto their balance sheet, will they remain there or sold off?  Guess I never saw if the loans that LC took onto the balance sheet earlier this year were going to remain or if they were going to be spun off.  I think it was something like 20 mil, is this right?

I applaud LC for diversifying and expanding in a time where some may worry about them. 
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T
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Car refis
#10: October 28, 2016, 11:00:00 PM
I still don't see how mortgage is a good product for LC. 

And the auto market is very competitive.  I'm not sure if it is more competitive recently.  Anecdotally, I think capital flows into consumer lending when business borrowing is weak.  Which is currently the case with our slow-and-steady GDP growth.  Seems like your company is a subprime lender -- I think that space has gotten extremely crowded by lots of new entrants searching for yield.
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T
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Car refis
#11: October 28, 2016, 11:00:00 PM
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j
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Car refis
#12: October 28, 2016, 11:00:00 PM
Does anyone know if these refinance loans are collateralized by the car? I'de assume yes but I can't find anywhere that says collateral is used.
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T
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Car refis
#13: October 29, 2016, 11:00:00 PM
I would only assume so, but my questions still exist. 
Nonattender it has already been stated there will be no origination fees.  Thus my questions.  How does LC make money? 
High end?  Where I see LC competing is low end actually.  I just do not see a lot of high end.  I absolutely could be wrong though. 
from: jz451 on October 29, 2016, 11:06:55 PM
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T
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Car refis
#14: October 29, 2016, 11:00:00 PM
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