The secondary and subprime automotive lending industry has been a highlight of the ongoing economic recovery. Banks and investors seeking places to put their capital have produced some impressive returns by funding specialized lenders who target consumers with less than perfect credit records.
A report of a few months back, however, revealed how certain experts believe that the good times are either coming to an end or at least evolving. A closer look will reveal, however, that leading lenders like Consumer Portfolio Services are well positioned to actually grow even more quickly far into the future.
A Slower Pace of Investment Holds Smaller Lenders Back
The story in question highlighted how a number of smaller lenders have been forced to scale back their operations in recent times. In fact, a couple of formerly successful seeming businesses ended up folding entirely after selling off their loan portfolios.
At a first glance, that might be taken to mean that conditions within the industry were softening to the point that even larger competitors would soon start feeling the pressure. In reality, demand has been climbing steadily even as these small-scale failures and retrenchments have been ongoing.
What gave rise to the reported problems was simply that investors had started to turn their attention elsewhere. Competition from larger, well established lenders had reached a point such that smaller concerns were no longer able to produce the profits that they had been. With margins pared so thin, a number of minor subprime lenders found that they no longer had access to the capital they needed to make loans.
Even More Opportunity Could Become the Rule
Even if the symptoms in question were taken by some as signs of tough times to come for larger lenders, the opposite is now proving true. Facing less competition from below, lenders that have been growing steadily and generating profits for many quarters running are now positioned to perform at an even higher level.
This can be seen in recent quarterly reports and earnings statements from some of the industry’s leaders. With the forward looking statements of some of the business’s most successful executives betraying nothing but optimism, it seems likely that the good times will continue.