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Now is the Time for Non-Prime Lending



Equifax Canada held a unique client and partner invite-only event on November 8th, 2018 focused on bringing together leaders from the Canadian non-prime auto finance industry to learn more about the current automotive industry climate, with a focus on non-prime lending. Here are some key takeaways presented to the 100+ senior leaders who attended.


Pulse: Latest Economic Indicators

Speaker: Tom Kontos, EVP & Chief Economist, ADESA Analytical Services

  1. Concerns about trade policy have affected Canada’s economic outlook despite favourable economic performance. This should change now that USMCA is in place.
  2. New vehicle sales continue to be strong in both the U.S. and Canada. The shift from cars to trucks continues, with trucks now making up 70 per cent of sales.
  3. Wholesale used vehicle values in Canada remain near all-time highs, as supply remains tight and U.S. buyers continue to be drawn by the weak Canadian dollar.


New Vehicle Industry Review: Canadian Leasing and Financing trends

Speaker: Robert Karwel, Senior Manager, Power Information Network Canada, J.D. Power

  1. Weakening retail conditions for consumers, and profit pressures for manufacturers will result in some weakening in the auto market, but changes in the use of financial instruments will cushion the downturn.
  2. New Vehicles:
  • Record prices, consumer spending, and Incentive levels…but we’ve likely hit the top.
  • Incentive growth still powering deals, but more rate hikes will stop this trend. Payments will rise.
  • Lease growth is very strong, and has for the first time in 10 years eroded long-term financing dominance.

3. Non-Prime Market:

  • Not a lot of substantial growth in loans over 7 per cent APR in the last five years in Canada.
  • It’s a regionalized issue in Western Canada and very high negative equity amounts will continue to dog this segment of loans….an issue as incentives start to wind down a bit.


Non-Prime Insights

Speaker: Wilton Wong, Senior Director, Strategy & Innovation, Automotive & Insurance, Equifax Canada

  1. Canadian debt is increasing, but sustainable for now.
    • Expenses that outpace income may make it hard for consumers to save.
    • Lenders should watch out for relevant changes in the economic environment – i.e., shift in percentage of consumers who are paying their full credit card balance.
  2. Millennials and Generation X are gravitating to purchasing of used cars and offer lenders opportunities to consider segmentation strategies.
    • Used vehicle market growth outpacing new; attributed to off-lease shift and better vehicle quality.
  3. Understanding consumer behaviours will be key to success in engaging a shift of prospects and buyers towards upfront digital retailing.
    • Non-Prime consumers are unique and should be engaged appropriately.


Understanding and Managing Fraud in the Automotive Industry

Speaker: Priyanka Parakarama, Senior Consultant, Fraud Prevention and Identity Management, Equifax Canada

  1. Increase in Auto loan fraud can be attributed to three main factors:
    • Massive increase in non-prime auto lending that occurred over the last eight years.
    • More stringent measures that are being put into place for more common avenues of Fraud…e.g., Credit Cards.
    • Ease in which identity thieves fabricate identities through the use of purchased private information.
  2. Fraudulent behaviour and negligence includes but is not restricted to:
    • Liar loans
    • Misrepresentation
    • Synthetic identities
  3. Current Auto fraud trends:
    • Buy & Sell
    • Fraudulent Payments
    • Body Shop Scam
    • Manipulation/Misrepresentation
    • Recurring Data Points
    • VIN Recycling


The Road Ahead for Non-Prime

Executive Lender Panel Speakers:

Sean Garrett, VP Originations, iA Auto Finance; John Hiscock, SVP Automotive Finance, Scotiabank; Paul Stock, SVP, Yes Plan Financial; Howard Thompson, VP Product, Strategy & Customer Service, TD Auto Finance; Ilja Troitschanski, President, Axis Auto Finance

  1. Increasing interest rates in Canada will likely lead non-prime lenders to update their lending rates as the gap between prime and non-prime rates narrow.
  2. Ability to establish a direct-to-consumer engagement strategy varies with key factors including strength of brand awareness with consumers and ability to avoid dealership disintermediation. 
  3. Adoption of non-prime adjudication automation in Canada has been slower than in the U.S., but lenders are consciously, but cautiously discussing new data methods by which to improve effectiveness and efficiencies.


Ready to discover how Equifax Canada's auto team can help you? Click here to contact your Equifax® representative today!


Opinions expressed during this event and summarized here are those of the presenters themselves, are presented for informational purposes only, and do not necessarily reflect the views of their organizations and/or of Equifax Canada Co. Nothing in this article/publication should be considered as legal advice.


This article is published by Equifax Canada Co.® 2019 All rights reserved. No part of this article may be reproduced, copied or transmitted in any form or by any means, or stored in a retrieval system of any nature, without the prior permission of Equifax Canada Co. This article is for informational purposes only and is not legal advice and should not be used, or interpreted, as legal advice. The information is provided as is without any representation, warranty or guarantee of any kind, whether express or implied. Equifax will not under any circumstances be liable to you or to any other person for any loss or damage arising from, connected with, or relating to the use of this information by you or any other person. Users of this article should consult with their own lawyer for legal advice.

About the Author

Wilton Wong, Senior Director, Automotive & Insurance, Strategy and Innovation. With 17+ years in the financial services industry and working experience across Canada, US and Europe, Wilton has held progressive leadership roles in Automotive Finance, Retail Banking, Private Wealth Management and Asset Management. In his current Strategy & Innovation role, Wilton is responsible for helping define the direction and growth drivers of Equifax's auto and insurance verticals within Canada.

Profile Photo of Wilton Wong