The View from the Finance Desk_2014

by Wendy on May 2, 2014

By: Joseph McKinney of Oregon Roads

The view from my desk includes the daily operations of our company. I run a business.

Our practices and deliveries, a term we use for all our transactions, occupy my time when I’m not involved in the management of the business. I meet with clients and spend my time figuring out what they want and negotiate with bankers, dealers, lenders, manufacturers, auctions, wholesalers, suppliers and even DMV’s on their behalf.

Then there are occasions when I spot trends and play amateur futurist. I must forecast and predict the variables and changes down the road because our business is always changing too. The needs of my clients change, tax laws change, values change, new trends emerge, new products replace old ones, and new technology changes habits as well as replacing the old technology. Change is inevitable.

Sorry about all this business philosophizing, but this really is the meat of one’s success in business. There is not very much risk in daily operations, and risks are well regulated on the settlement and delivery side of business too. The greatest business risk one faces is inaccurately forecasting the trends in one’s field.

Schlitz was the second best selling beer 40 years ago. Miller added water to create lite beer and Budweiser followed the trend. Schlitz thought it was an absurd trend and they lost market share until, eventually, they were out of business.

Oregon Roads was incorporated in 1989. We were in a mountain-view, high-rise office suite in downtown Eugene Oregon; a new vehicle leasing company. Doctors, lawyers and Indian Chiefs, salespeople, schoolteachers and anyone else who wanted an agency to arrange their lease, as well as the purchase, depreciation billing, financing and ultimate resale of their vehicles, came to Oregon Roads. Car dealers didn’t understand leasing back then. Oregon Roads underwrote most of Oregon’s leases. But changes, meaning growth, started after our first 4 years. We started accepting trade-ins and selling to auctions and wholesalers. Then we began leasing used vehicles too.

We opened Salem and Portland offices. Our expertise in the more difficult aspects of the car business brought us into niche financing. We leased hundreds of oven-equipped restaurant delivery vehicles across the United States, leased police cruisers to municipalities, arranged long term financing for ramp vans for people with physical challenges and financed our sales of early versions of electric vehicles.

We needed space and purchased our current headquarters in ’99. It wasn’t specialty vehicles but the ordinary lease returns and trade-ins that so many of our clients wanted to buy for their family members that caused that change. And soon after we had space, we filled it up. Lane County Oregon is a hub for RV manufacturing, and Oregon Roads’ reputation in loan origination was attractive to the factories in the region. We offered financing to their clients much like GMAC offers financing at GM dealerships. Motorhomes, trailers and living quartered horse trailers were humming down the highways, fueled by low rate, high quality financial products from Oregon Roads.

Now we’re an RV dealer, representing Ever-Lite in the state of Oregon. The Ever-Lite is TRA Emerald Certified, the highest green rated recreational product, saving water, electricity, using composite plastics and ultimately saving fuel due to the light weight durable trailer behind your puller. I’d also like to mention that they’re healthy, which appeals to so many people here in the Northwest. Most of our RV financing is for folks outside of Oregon but our Ever-Lite buyers have been primarily Oregonians. One local entrepreneur bought one for business. He advertises for green tourists, picks them up at the airport, takes them to the park on the coast or near the hot springs in the mountains, it’s their choice. He leaves them for a week with provisions; healthy foods in the fridge and freezer. They get maps and guides, and get picked up in a week for the return trip. He’s penciled it so 6 weeks of rentals covers all his expenses for the year.

Since 1990 we’ve been offering commercial and consumer leasing, and that’s still a big part of our business today. Sales and financing of both new and used vehicles followed, as well as specialty and custom financing and leasing, and for just over a decade, the financing of recreational products (yes, we have experience in marine lending too, as quite a few of our clients have boats).


Trends in recreational financing include new twists but don’t seem to make considerable changes or impacts to the traditional methods of paying for our RV’s. There was a time of easy money, but it really wasn’t cheap. When anyone could qualify for an RV loan, too many were sold. A market correction impacted housing and RV’s. Any money that was saved by “easy credit” was eventually returned.

After that period of “easy money” came “impossible money”. To qualify for an RV loan you needed to have the qualifications for a signature loan, meaning your net worth was so high the amount of credit you requested was minuscule. And in addition to your qualifications you still needed to pass a liquidity test, meaning you could prove that you had the cash or cash-equivalents to pay for the coach. Only the people who really didn’t need to borrow would qualify for an RV loan.

Well, it’s good news that those days have passed. The big banks who underwrite most RV loans have loosened their criteria a bit. They don’t insist on big down payments, but they do still want some money down. They understand the term “skin in the game”, meaning a borrower is less likely to default on a loan that would cause them to forfeit their cash down, or “skin”. Banks may look beyond a credit blemish if the long history of credit is a clean one. They no longer expect you to have a quarter million in the bank to qualify to borrow a quarter million Things are back in balance.

That gives me cause to celebrate. Things are back in balance at the same time that interest rates are at or near historic lows. For the last two years I’ve been addressing business associations and telling them to “build, buy and borrow now”. Three or four years from now we’ll look back and say “why was I asleep? Why didn’t I arrange a lifetime of borrowing when rates were so close to zero?” I have three decades of lending experience and I’ve never seen rates this low. The sum of the interest on the loans I disclose to my clients justifies the borrowing and makes it look artificially cheap. For every $10,000 my average client borrows on a 5 year term costs them $100 per year, $500 in total. Imagine that. If the big banks weren’t getting their funds for 0% from the government, they would be out of business in no time. If they were to make any less in interest, the loan would be considered a nuisance.

So many Americans watched the collapse of the economy and said to themselves “buy less, borrow nothing”. I guess we’re lucky that so many of them are on the sidelines today, because if every consumer were to take advantage of today’s low rates it would cause a fury of spending, inflation and ultimately the end of these deliciously low rates. The rest of us, willing to sally forth and live our lives as planned, are rearranging our financing today and making our big purchases, those things we buy that traditionally use financing. We are acting now because the timing is perfect. This is not a trend. I won’t be surprised when RV financing rates hover around 10% and campers are complaining about those lucky ones who locked-in those low rates when the timing was right and the getting was good. That time my friends, is today.

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: