BREAKING: Subprime car market loses major lender

Author

Colin Velez
June 17, 2024

Rifco National Auto Finance, a major subprime lender in the Canadian car market, announced today that it would put all auto lending on hold for an indefinite period of time.

Why this matters: While auto lenders have grown increasingly cautious in the years following the pandemic, few have taken the dramatic step of withdrawing from the car market entirely. The move by Rifco illustrates the plight of subprime buyers in today’s automotive landscape as well as the urgent nature of the affordability crisis.

What happened:

  • In an email sent to clients, the lending firm made the following statement: “Effective Monday June 17, 2024, Rifco National Auto Finance will not be accepting new applications for financing through our national dealer network.”

  • Rifco attributed the decision to “Current market and economic conditions,” which it says have created “historical rises in used vehicle prices, cost of living, and interest rates.”

  • Despite adding that “Affordability is at near all-time lows,” the company promised to return once the market and economy allow.

  • Rifco is also reportedly making layoffs, possibly including members of its Dealer Partner-Development team, which it noted would no longer be able to continue supporting clients.

The decline of subprime share: With the vast majority of car buyers today being classified in the prime-plus categories, the number of options for cash-strapped shoppers is dwindling. Less than 6% of auto loan borrowers were classified as subprime or deep subprime during the first quarter, compared to roughly 24% in 2018. And the decline has yet to stop. Earlier this month, Cox Automotive revealed the average approval rate for subprime loans fell in May from 13.2% to 12.5%.

For dealers: The disappearance in subprime market share also presents challenges for dealers, as it translates into fewer sales. Although effort is being made to improve affordability through incentives and discounts, demand remains pent-up in both the new and used markets compared to before the pandemic.

Bottom line: Lending headwinds are proving to be one of the most persistent issues stemming from the COVID-19 pandemic. While the market is showing some encouraging signs, it will likely take some time for firms like Rifco to feel safe enough for a return to normal.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 64,000 others now, it's free:

Boost sales with Bumper.com's vehicle history reports, featuring NMVTIS data. Our reports can enhance trust and help you close deals faster.

As an NMVTIS-approved data provider, Bumper.com offers essential information crucial for auto dealers. Discover how our tools can help transform your business and streamline operations.

Connect with us at NIADA booth #613 or schedule a demo to learn how Bumper.com can help elevate your dealership's performance and take your sales to the next level.

Reply

or to participate.