Question-and-Answer Session
Operator
We will go and take our first question from Edward Yruma - J.P. Morgan.
Edward Yruma - J.P. Morgan
Can you give us a quick update on your subprime exposure on the new vehicle front as well? And have you seen any reduction in credit availability?
Charles R. Oglesby
The subprime really hasn’t impacted the new vehicle at same rate that it has the used vehicles for us. The availability of credit in the subprime has certainly tightened down because the lenders are crossing the t-s and dotting the i-s.
As we mentioned earlier, the subprime market for us, we actually started in ?05 and ?06 with those initiatives and announced it in first quarter of ?07. It had been about 30% of our used vehicle sales, and maybe we pushed it beyond that in first quarter of ?07. So with that decline, and with the decline in the subprime lending underwriting rules, that is what has slowed down the progress we have made in the used vehicle side.
Gordon Smith
In addition to that, Ed, on a new side what we are seeing is that the OEMs are stepping to the plate and, while I can’t directly correlate it, I’ll give you a statistic. In December this year, typically the OEMs account for about 50% of our retail financing business; in December it was 55%. So to the extent there is a little bit of weakness in the bank side of the market, for new vehicle sales, the OEMs look to be stepping to the plate and covering that void.
Edward Yruma - J.P. Morgan
Got you. So does that 20% to 25% of your current used exposure subprime, is that already reflective of the reduction availability, or does that go to some number that’s lower and that’s the number that’s assumed in your used guidance? Thank you.
Charles R. Oglesby
No, that’s a number that we are comfortable maintaining as a part of our business. The subprime market actually is even growing today with a lot of the impact of credit markets last year on consumers. So that market is always there. It takes three pieces to be successful in that market. One is the appropriate inventory. Two, having a dedicated staff for that market, and then three, credit availability.
Disruption in any of those areas disrupts that market. So, we actually were positioned well, the first inclination was when inventory started to tighten down and getting more expensive, and then as credit tightened down, that created the decline in that market.
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