Post by DeafEater on Jan 7, 2017 12:40:08 GMT
Jan 7, 2017 5:54:05 GMT james said:
For these loans the most important security is the total of HP payments remaining, not the vehicle value. If we ever see a renewal where no new vehicles are added compared to the original schedule that is a high probability indicator of trouble because the future HP payments have dropped by six months worth.It isn't a concern that AE wants to borrow more. They need to buy vehicles and repayments from their customers come in over time so we should expect growth in loan value linked to growth in their business.
What I hadn't spotted in the schedules is that AE are endeavouring to add enough NEW customer loans to the schedules for the rolled over MT loans such that regardless of the true resale value of the vehicle, the expected revenue from the remaining duration of the included HP contracts, amounts to double the capital value of the associated MT loan. Hence if the MT loan was for 150k, AE arrange the schedule such that at the beginning of the MT loan, they expect to receive 300k of payments from their customers. As long as the HP contracts are on average considerably longer than the 6 month term of the MT loan, the sums still add up.
In answer to Archie's query, I don't know whether AE have a 'normal' length of HP contract but I picked a random BMW from AE316 which also makes an appearance in AE618 and the contract for that is clearly 3 years.
On the whole I think I'm now more relaxed about the AE loans but if they haven't paid back some capital by this time next year, I shall be less so.