NovaStar Financial - Competitors

NovaStar Financial Competition

Now Viewing NovaStar Financial's competition in: Consumer Finance

Recent Developments

Auto Finance Moves to Longer-Term Loans - Auto finance companies are shifting to long-term car loans and cutting unprofitable lease arrangements. To help reduce large auto inventories, the major auto finance companies are offering loans up to seven years, which stretch out payments, effectively reducing customer monthly payments. The risk for finance companies is that longer-term loans mean slower payment of principle, increasing the magnitude of potential defaults.

Consumer Credit Outstanding Falls - Outstanding consumer credit fell 9.4 percent in May 2008 after falling 9.9 percent in April. It rose 3.4 percent in first quarter 2008, so the decline is a shift in consumer behavior. The decline in debt is a reaction to the national economic downturn, as evidenced by changes in auto loans: both interest rates and maturities are rising for new and used car loans. New car loans averaged 5.82 percent over 65 months in May 2008, up from 5.08 percent and 61.7 months in second quarter 2007. Longer maturities reduce monthly payments.

Auto Loan Delinquency Rates Decline - The national 60-day auto delinquency rate declined almost 18 percent in first quarter 2008 from the prior quarter. Historically, the rate declines between the fourth quarter and first quarter of the following year. Year-over-year comparisons were flat, but the decline between fourth quarter 2007 and first quarter 2008 was the largest in four years, indicating a possible improvement in the auto finance market. Auto delinquencies were highest in Louisiana and Alabama, lowest in North Dakota and Montana.

Competitive Landscape

Demand is driven by consumer income and demographics. The profitability of individual companies depends on the correct assessment of repayment likelihood and effective collections activities. Large companies have an advantage in using computers to serve large portfolios of mortgage and credit card loans, and also have access to cheaper sources of funds, but small companies can compete effectively in the cash lending or sales finance segments, where personal contact is more important.

Full Industry Overview For Consumer Finance

Consumer Finance Industry Forecast

from Hoover's/D&B subsidiary First Research

The output of US credit cards and finance companies, which includes consumer finance, is forecast to grow at an annual compounded rate of 6.2 percent between 2008 and 2013.

Credit and Finance Companies Growth Improves Slightly

First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.