Lending Perspectives: Is your auto lending strategy ‘COVID-19 proof’?
Different from the 2008 recession, the current pandemic economy features a lot of competition for direct and indirect loans.
Last month I shared with my readers several reasons why I believe that the COVID-19 recession is very much different than the Great Recession. Since the Great Recession is still fresh on most everyone’s mind, it’s natural to try to draw parallels between it and our COVID-19 recession. Yet in most cases, it’s hard to learn much from the Great Recession and apply it our critical business decisions right now.
A major chunk of the credit union industry’s business is in auto loans. Last month I shared several things that are quite different in 2020 than in 2009 as it pertains to projecting loan losses. Let’s forget loan losses for now and focus on keeping our businesses growing. From that perspective, there also are a lot of things that are different now than they were in 2009.
Financial Market Stability
I recall all too well a conference call Ent Credit Union had with its asset-liability advisor in February 2009. The financial markets were, in a word, dysfunctional. Uncertainty about loan performance and the overall economy had scared off investors in auto loans—so much so that the market was demanding returns of upwards of 16% on a prime pool of loans.
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