We’re now over 9% and that it’ll probably be a gradual process just to make sure that we don’t damage the ability for our dealerships, as Chris mentioned to finance customers, but balance that against the economic returns for DFC.Chris Bottiglieri Got you. Okay. That’s really helpful and then just a second and final unrelated question. I would imagine that you are one of the top three largest dealers of Asian imports in the country. Hopefully some pretty good communication with those OEMs. Like what’s your sense on their production plans? At what point do you foresee them getting new vehicle production inventory day is up to where the domestics are because that to me, like you have more exposure to those relative to the publics, and I think once the Nissans and the Hondas of the world get production about thick incentives normalized, that’s probably what it takes.
It could be my view, but curious to see how you’re thinking about that.Chuck Lietz Yeah. Hey, Chris. This is Chris again. You’re right, 42% of our overall sales come from the import brand. So obviously, heavily weighted towards imports, which has been great. Phenomenal product, low day supply and awesome margins still in this environment.As far as line of sight, it seems to depend on the month where, the production cycle that we get allocation off of is probably 60 days out at best and so line of sight on that is tough. I think that things are going to continue to improve though throughout the year on the import side, like they have already for domestics and luxury. So we expected to improve throughout the back half of the year; big deal, one coming.Operator Thank you.
Our next question is come from the line of Adam Jonas with Morgan Stanley. Please proceed with your questions.Adam Jonas Hey, thanks everybody. Good morning. Just wanted to go back to the DFC, just one fine point of the $100 million reduction for fiscal ’24; obviously, you had some prior assumption for CECL reserves there, and I understand the accounting change, but I’m just curious, isolating the reserves, what can you — it’s hard for me to tell whether you made a change from 4Q to 1Q, irrespective of the accounting change and to tell us what that level, what that provision is right now. Is it 27 on the whole book? Chuck Lietz The provision rate, Adam thanks for your question. This is Chuck. The provision rate is 3.1% of the book. So that’s where we’re at.
We feel that in our internal models would actually indicate something a little lower than that. But from a conservatism perspective, we want a little bit of cushion in there.Relative to the first part of your question, which had to do with 2024, yes, obviously there are some adjustments relative to the spread rate compression that Tina mentioned earlier in her comments. We adjusted that in. We factored in clearly some of the impacts of what’s happened to our cost of funds with regards to sort of the capital markets, but again the preponderance of what that change is in 2024 is again, the moving of the CECL reserves back into DFC profitability as Tina mentioned.Adam Jonas Got it. I appreciate that. And just as a follow up, the size of the book reduction from to $4 billion from $6 billion, if you addressed it, I’m sorry if I missed it, if it was addressed earlier, why the $2 billion reduction in the size of the outstanding balance?
Thanks.Chuck Lietz Adam, this is Chuck again. Part of that is a function of our prepayments, given that we’re in a higher credit quality class of contracts. Our prepayment rates are a little higher than what we would’ve projected with the prior credit quality mix that we are originating and so that’s one of the reasons and then we have moderated, our percentage originations of the total Lithia & Driveway book. So, we were saying going up to 15%, now we’re moderating that back more in the 13% to 14% range.Operator Thank you. Our next question is coming from the line of Colin Langan with Wells Fargo. Please proceed with your questions.Unidentified Analyst Hey guys, this is Costa [ph] filling in for Colin Langan. My first question following the Silicon Bank situation, there’s been some issues getting ABS funding and just general volatility in credit markets.
So, I wanted to see if you guys can frame for us the impact that it’s had on DFC?Chuck Lietz So thanks. This is Chuck again. First I’d point you to our issuance, and I know its pre-Silicon Valley Bank, but our first quarter issuance; that deal was incredibly over-subscribed, six times over-subscribed on certain tranches and I think that’s really a testament to sort of the DFC value proposition and just sort of where we sit in terms of the economics as a fairly new issuer, the loss curves that we’re assigned from the credit ratings tend to be very conservative. And so from a risk return perspective, our paper on a notional, apples-to-apples basis looks far more attractive than other, more seasoned issuers that have a very tight spread rate.So we feel very confident even with the sort of frothiness in the current capital markets that the DFC value proposition being a true captive lender, as well as some of the technical considerations of our portfolio will continue to allow when we go to the term market a significant amount of demand for our paper going forward.Unidentified Analyst Thanks.
My second — my last question is, I think you guys guided SG&A to 61% to 64% in ’23, you guys are in that range and then 50% in ’25. I think last quarter you highlight an opportunity to reset the cost structure…Chuck Lietz 50% in ’25. 50% in the future. 60% in ’25, yeah. Just to clarify, keep going.Unidentified Analyst Fair, thanks. Yeah, so last quarter you had highlighted an opportunity to reset the cost structure to get offset of 50% of lost gross profit, driven by commissions. I think it’s been lower last several quarters. So what was the cadence of kind of getting at offset for the rest of the year in 2024?Chris Holzshu Yeah, Colin, this is Chris. We’ve been heavily focused on kind of this rightsizing in certain pockets that had drove up our SG&A in a declining GPU environment and sales environment that we had to adapt to and since we last spoken off of coming of Q4’s call, we’ve eliminated about a 1,000 positions in the field and have rightsized a lot of pay plans, kind of getting folks ready for this new environment that helps us leverage the gross and the net.And so, March actually, we saw a lot of that come through the bottom line and we’re anticipating additional strength coming into Q2 which we hope to share with you in July.Operator Thank you.
There are no further questions at this time. With that, this does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.