Author: Mike Deny

Powersport lenders are advancing their technology and buyer programs to enhance the experiences of customers and dealers as we approach 2025.

Concerns regarding affordability have significantly impacted the powersports industry throughout this year, hampering consumer confidence and demand while unveiling market gaps that lenders are striving to fill.

With many consumers holding back on spending, retail sales have declined, promotional efforts have surged, and inventory levels have stagnated across the industry. These challenges underscore the growing need for lenders to provide accessible platforms for consumers and dealers maneuvering through the current market challenges.

According to an October 7 report from BMO Capital Markets, average powersport sales dipped by 3.6% year-over-year in September.

Year-over-year sales also fell, with powersport sales decreasing by 5.4% in August, 4.6% in July, 3% in June, 3.7% in May, and 0.9% in April, as per BMO’s data.

Despite promotional activities being generally similar to 2023 levels, they are “slightly more aggressive” compared to pre-pandemic efforts, noted BMO.

During the recent PowerSports Finance Summit 2024, industry leaders expressed optimism for the upcoming year, contingent upon further rate cuts by the Federal Reserve and a boost in consumer confidence.

The summit panelists also discussed progress made in enhancing the consumer experience and addressing dealer demands with adequate support.

Focusing on technology

There exists a technological divide in the powersports industry between consumer requirements and lender implementations. Summit lenders emphasized the necessity of adopting technology in critical areas.

“It’s not that the market is transitioning to an entirely digital environment,” Anthony Moses, the global chief strategy and innovation officer at Yamaha Financial Services, mentioned during a panel discussion. “It’s about recognizing that different customer segments are starting to exhibit varying preferences.”

Sheffield Financial, based in Winston-Salem, N.C., is harnessing technology to “supplement” existing consumer services while retaining traditional support, according to Susan Andersson, head of national accounts and senior vice president. “At Sheffield, we offer tech options for those interested, but we still maintain a team of 50 loan processors always available to take calls,” she noted.

Enhancing dealer and consumer interactions

Lenders at this year’s summit are also utilizing prequalification tools to simplify both the shopping and financing experiences for consumers while speeding up funding for dealers.

For example, Sheffield leverages such tools to deliver quicker service to consumers who explore options online before visiting a dealership.

“Customers just need to input their mobile number and the last four digits of their Social Security number,” Andersson explained about the prequalification tool. “The decision is made in seconds, providing that customer with the assurance they are pre-approved as they arrive at the dealership.”

Summit panelists agreed that prequalification tools and QR codes have streamlined the loan process for both consumers and dealers.

“Dealers can utilize [QR codes] in various locations within the dealership, whether on a hang tag or positioned on the equipment,” Andersson noted, adding that some dealers have even employed QR codes as magnets affixed to the equipment. “Our objective is to create an effortless experience for both customers and dealers.”

Octane’s prequalification tool enhances consumer confidence while meeting dealers’ demands for advanced technology and quicker financing, according to Mark Davidson, co-founder and chief growth officer at the New York City-based lender.

“Customers can receive prequalification whether they are at home or strolling through the showroom,” he remarked. “When they are pre-approved, it boosts their confidence to proceed with the purchase, and dealers appreciate it because it indicates the customer is both motivated and capable of buying.”

Davidson mentioned that Octane is “exploring” the benefits of introducing prequalification in the marine sector after entering the segment in October.

The lender focuses on “engaging customers at their convenience” while providing dealers with the “tools” through hang tags or Instagram ads linked to financing options, stated Jon Vestal, Octane’s head of powersports and outdoor power equipment.

“We consistently seek feedback from OEMs and dealers, and we align our direction based on their needs.” — Jon Vestal, Octane

“Ultimately, we continuously request feedback from OEMs and dealers to ensure our path aligns with their needs.”

Emphasizing customer experience and buyer programs

Lenders at the PowerSports Finance Summit underscored the importance of identifying which traditional processes and buyer programs effectively benefit consumers and which ones are due for modernization.

“We still do not utilize voicemail, ensuring that when customers or dealers call, they connect with a representative immediately,” Sheffield’s Andersson stated.

Harley-Davidson Financial Services (HDFS), for instance, is planning a comprehensive review of all its programs — including those targeting limited credit borrowers and first-time buyers — to identify strategies for boosting motorcycle sales while managing the lender’s risk profile, shared Yordanka Martin, chief risk officer at HDFS.

HDFS’ efforts to revitalize its existing offerings include plans to expand its Flex Financing program to include certified pre-owned and used motorcycles in 2025.

This decision comes as Harley-Davidson reported a 10% year-over-year decline in North American motorcycle sales, dropping to 24,600 units in Q3, according to an October 24 financial release, primarily attributed to reduced consumer traffic amidst rising interest rates.

Nevertheless, HDFS’ retail finance receivables remained stable year-over-year and quarter-over-quarter at $7 billion in Q3, as per Harley-Davidson’s earnings presentation.

Moses from Yamaha remarked that incentives and financing programs aligning with buyer needs are crucial in fostering brand loyalty across any market.

“How a consumer selects prequalification parallels how they choose a lender,” Moses stated. “Building relationships, ensuring smooth integrations, and facilitating ease-of-use are vital, but ultimately, promotional offers and programs are likely the most decisive factors.”

Yamaha has been proactive in promotional activities this year, joining Polaris and Kawasaki in launching new rebates this October, according to BMO data. Yamaha’s latest offers include a $1,000 rebate on specific model year 2024 ATVs.

Attracting new buyers

While promotional activities remain high, some dealers at the summit indicated that a segment of the market is underserved due to the presence of numerous thin-file and first-time buyers, yet lacking suitable programs tailored for them.

“I don’t understand why we can’t facilitate loans for $7,000 to $8,000 for these younger buyers, as long as they can provide proof of income,” Michael Campbell, sales and finance manager at Destination Cycle in Kerrville, Texas, remarked during the panel discussion.

Implementing a first-time buyer program, he noted, would allow dealers to better serve consumers who are often left out of the market, helping them acquire affordable vehicles while also facilitating the building of their credit profiles.

“We’re not looking to issue a primary loan on a $37,000 motorcycle,” he added.

Adapting to affordability

As conditions improve and demand rises, both dealers and consumers are likely to seek out lenders who demonstrate a commitment to making vital investments.

The Stamford, Conn.-based lender Synchrony continuously seeks ways to streamline the financing process for dealers, as explained by Senior Vice President and General Manager Susan Medrano at the summit.

Their all-in-advance loan application exemplifies the lender’s readiness to adapt, stated Medrano. The application process for powersports and outdoor equipment has been streamlined, reducing required fields from 13 to just three.

“We’re focusing on simplifying the process significantly,” she added.

Synchrony also offers specialized financing solutions for several prominent powersports brands, including Bombardier Recreational Products, Kawasaki, Polaris, and Suzuki.

Looking forward

While it remains uncertain if the powersports industry will witness a notably improved retail landscape in 2025, lenders are diligently developing systems to better serve consumer and dealer demands, irrespective of market conditions. The shared goals of speed and convenience resonate among lenders within the sector.

“From my experience, the relationships between dealers and lenders have likely reached their best state in recent years,” said Destination Cycle’s Campbell, who has been with the dealership since 2017. “Much of this improvement hinges on the relationships being built, whether with mainstream lenders or local credit unions.”