Car Insurance

Recent improving performance trends in prime auto loan asset-backed securities (ABS) continued in May, according to ‘In the Auto ABS Driver’s Seat,’ a Fitch Ratings newsletter released today. Fitch’s prime auto loan ABS delinquency and prime annualized net loss (ANL) indexes both posted further improvements in May.

Delinquencies of 60 plus days or more dropped 4.8% in May to 0.40%, versus that of April. Delinquencies are 23.1% lower through May 2005 versus the same period in 2004, and the index is at its lowest level since June 2002. Prime ANL dropped 21.4% in May to 0.66%, the 16th consecutive monthly decline and the lowest level in more than five years. Prime cumulative net losses (CNL) were 0.85% in May, down 3.4% from April and 11.4% lower than in May 2004.

In the subprime sector, delinquencies of 60 plus days or more rose to 2.30%, up 8% versus April, but 4.6% lower than one year ago. ANL continued to improve in May dropping 2.8% to 4.86%, 26% lower than in May 2004, reaching its lowest level since June 2001. However, volatility persists in this sector, and delinquencies and losses are expected to pick up in the summer months, which are seasonally a weaker period.

The latest edition of ‘In the Auto ABS Driver’s Seat,’ a monthly newsletter that tracks retail auto loan performance, auto industry trends, and developments in the auto ABS securitization market, is available on the Fitch Ratings web site at www.fitchratings.com in the ‘Structured Finance’ sector page under ‘ABS’ in the ‘Newsletters’ section.

Fitch’s rating definitions are available on the agency’s public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.

Standard & Poor’s today assigned its triple-’A’ ratings to Oracle Epsilon Funding’s JPY6.2 billion floating-rate and JPY15.6 billion fixed-rate notes. The notes are ultimately backed by a pool of auto loan receivables originated by Orient Corp. (Orico).

Standard & Poor’s ratings address the timely payment of interest and full payment of principal by the legal final maturity date of February 2007.

The notes are secured by JPY21.8 billion in fixed-rate bonds issued by Orico Maple Funding (OMF). The bonds, in turn, are secured by a senior beneficial interest in a trust created with Sakura Trust & Banking Co. Ltd. from a pool of auto loan receivables originated by Orico. Orico has entrusted an aggregate amount of about JPY25 billion of auto loans to the trust and has also purchased a subordinated beneficial interest of roughly JPY3.2 billion issued by the trust.

The ratings are based on:

– Overcollateralization of approximately JPY3.2 billion, or 12.8% of the
securitized pool;

– A reserve account to be funded at closing with about JPY340 million;

– A relatively high level of excess spread that is expected to continue over
the life of the transaction, and can be used to redeem part of the principal of
the senior certificates equivalent to the amount of defaulted auto loans;

– The status of Oracle Epsilon and OMF as special-purpose, bankruptcy-remote
entities; and

– The existence of a swap agreement that will be contracted with an ‘AAA’
rated swap counterparty to mitigate any mismatch in interest rates between the
notes and the underlying receivables.

Farmers Insurance, Colorado’s second-largest insurer, with more than 479,000 auto customers, and Citibank have joined together to offer auto loans through Farmers’ 614 insurance agents.

Farmers will also offer credit life and disability coverage where approved, through its life insurance company, Farmers New World Life.

The program has been launched in Colorado, Nevada, Oregon, Arizona, and California. It will be expanded in phases to the remaining 24 states where Farmers Insurance operates.

Customers can contact their local Farmers agent at the time they want to purchase an automobile and obtain or refinance a loan. Notification of approval will usually occur within three hours.

“Providing competitively priced auto loans is another step toward our business strategy to offer an assortment of companion products and services to meet the needs of our customer base,” said Don Mealer, assistant vice president, regional operations, at Farmers. “We are excited about the opportunity to work with Citibank, one of the premier financial institutions in the world, on this venture,” Mealer added.

“Citibank is honored to have been chosen by Farmers to participate in this program. Citibank will integrate its lending expertise with its efficient servicing capabilities to offer a superior auto loan product to Farmers’ customers,” said Denis Moore, vice president and business manager for auto finance at Citibank.

With headquarters in Los Angeles, Farmers Insurance includes the third-largest auto and homeowners insurers and one of the nation’s leading commercial insurers, and also operates a major life insurance subsidiary.

Citibank is a subsidiary of Citicorp, a global financial services organization serving individuals, corporations and governments in 98 countries. The corporation has businesses dedicated to serving the full spectrum of financial needs for consumers in more than 50 countries.

Increasing numbers of consumers are taking advantage of today’s low-interest rates and using home equity loans and lines of credit to pay for spring remodeling, tuition, debt consolidation and virtually any other major expenses, according to the Automobile Club of Southern California.

The current low-interest rate climate has helped to boost home-equity borrowing with the volume of home equity loans at large commercial banks jumping 62 percent from $42 billion in 1990 to $68 billion in 1998, according to the Federal Reserve Board.

“One attraction of a home equity loan is the possibility that you could deduct the interest paid on the loan from income taxes,” said Barbara Wilson, Auto Club financial services product manager. “That makes home equity loans a preferable alternative to many other types of debt.”

The Auto Club’s financial services provider, AAA Financial Services, developed a series of questions and answers for consumers who are considering a home equity loan or line of credit.

1) Should I choose a home equity loan or a home equity line of

credit?

In the current low-interest climate, a home equity installment loan might be a smarter choice. A consumer can borrow the full amount at one time and get a fixed rate. As a result, the borrower can take advantage of today’s low rates and know how much to budget for monthly payments.

A home equity line of credit allows one to borrow from a revolving line of credit with variable interest rates. The money is accessed by writing a check and only the portion of credit used is paid back. However, if market rates fluctuate, monthly payments may do the same.

2) Do the loans and lines of credit place restrictions on how I

use the money borrowed?

The loan and line of credit can be used for anything including home improvements, debt consolidation, tuition, purchasing a car or medical expenses.

3) How can I find the best interest rate?

Shop around to determine the variety of rates financial services companies are offering. Also, try to find a company that doesn’t charge any application fee. Be sure to ask whether they charge a penalty for early payoff. If no penalty is charged, borrowers may be able to add some extra payments and retire the loan more quickly.

4) Should I seek a 5-10- or 15 year term?

The term of the loan depends on future financial strategy. For example, if you are planning to retire in 10 years, and don’t plan to use the loan as a possible tax deduction at that time, you may only want a 10-year loan. Remember, the longer the loan, the lower your monthly payments.

5) What are the tax advantages of home equity borrowing?

Home equity loans and lines of credit offer good tax advantages because the interest may be tax deductible. To be certain how the deductibility of interest will affect your taxes, be sure to check with your tax advisor prior to applying for the loan or line of credit.

6) How long will it take to apply and get an answer?

Increasing numbers of lending institutions are allowing customers to apply for home equity loans and lines of credit either over the phone or over the Internet. The application process can take as little as 10 minutes. Many also have sophisticated technology that can deliver conditional approvals in a few hours via phone or over the Internet. Final approval takes 5-10 days while the house you offer for collateral is being evaluated. Once your application is approved, a few institutions will send the documents and checks through the mail, so the entire process can be completed without leaving home.

The Automobile Club of Southern California, the largest affiliate of AAA, has been serving members since 1900. Today, Auto Club members benefit by the organization’s emergency road service, financial products, travel agency and trip planning services, highway and transportation safety programs, insurance products and services, automotive pricing, buying and financing programs and legislative advocacy.

Finding a bad credit auto lender is simple. When buying a new or used car, the auto dealer may offer bad credit financing, or refer you to a good lender. Even so, car buyers should consider arranging their own financing. Bad credit auto loans are tricky, and some lenders will take advantage of you. For this matter, it helps to choose a good lender and know your available options.

Check Your Personal Credit Report

Before applying for an auto loan, bad credit applicants should request a copy of their personal credit report. Review the report, and take note of your FICO score. Upon submitting your application, the auto lender will base approval on your credit score and credit history. Additionally, checking your report prior to applying reveals your credit standing. Some auto lenders classify sub prime borrowers as persons with scores below 640. On the other hand, another lender may qualify a borrower with the same score for prime rates.

Compare Different Auto Loan Rates

Making comparisons is a surefire way to get approved and find the best auto loan rate. Auto lenders qualify applicants for varying rates. If you have bad credit, failing to shop around and obtain multiple rates will cost you more money. For example, a dealer’s finance company may charge an interest rate of 10%, whereas a credit union may charge the same applicant 8.5%. The percentage difference could save you $50 - $70 a month.

The best way to compare rates is to visit an online auto loan broker site. Request a no-obligation quote, and wait for a response. Each quote received will include details such as qualifying interest rate, loan approval amount, loan term, and estimated monthly payment. Review the quotes carefully, and pick the lender that offers an affordable deal.

Make Efforts to Boost Low Credit Score

Improving your credit score doesn’t happen overnight. However, if an auto lender recognizes improved credit habits, they are more inclined to approve a bad credit loan application. Before applying for a car loan, practice submitting regular payments to creditors. Furthermore, attempt to reduce your overall debt ratio.