Quite a few investors today are interested in how the stocks of indirect automotive lenders like Consumer Portfolio Services might bolster their portfolios. Many such lenders have performed well in recent years and seem to be anticipating bright futures. Analyzing how a particular indirect lender compares to others in the industry from the standpoint of an investor also tends to be fairly straightforward.
A Few Details That Make It Simple for Investors to Compare Lenders
Deciding whether to invest in any financial services company can seem a bit more difficult than with certain other types of stocks. While the stocks of high-flying technology companies can sometimes be profitably traded based on little more than hype, those of lenders tend to be tied much more closely to the underlying fundamentals.
Fortunately, there are a handful of relatively simple issues that make the most difference when it comes to the price movements of such equities. Some of the details that investors will typically do well to look into when comparing various indirect lending stocks include:
- Recent contract purchases. The difference between an indirect lender and a conventional one is that the former does not actually approve and issue loans. Instead, indirect automotive lenders enlist particular dealerships in partnership agreements that have these allies performing those functions. After a dealer has approved and given out a loan that meets the standards established by the lender, the loan will normally be purchased soon thereafter as part of a bulk transaction. An indirect lender’s recent activity levels of this sort will provide an investor with some insight into its current situation and future prospects.
- Charge-off rate. Indirect automotive lenders mostly focus on serving car buyers who do not necessarily qualify for financing from other sources. As such, default rates on the loans indirect lenders buy will almost always be somewhat higher than those typically associated with other types of borrowing. Even so, investors should always compare a particular indirect lender’s recent charge-off frequency with those of others in the same line of business.
Many Interesting Opportunities for Investors
Coupled with analysis of other important details like recent securitization activities and other factors, thinking about details like these should make it fairly easy to find especially enticing indirect lenders to invest in. As many such stocks have performed well in recent years, quite a few investors are interested in such opportunities.