Mark Rappaport
President
Simplicity Division
EFG Companies
According to recent data from the S&P Dow Jones Indices and Experian, auto defaults rose by 9 basis points in August, and by 10 basis points in September, 2017. These represent the largest month-over-month increases since December 2011. In addition, September’s auto defaults represent the highest level analysts have seen since February 2015.
With these numbers in hand, it’s no surprise that more banks are pulling out of the subprime auto finance space to retool their credit algorithms. As credit unions and captives scramble to capture that market share, lenders everywhere are evaluating how to securely expand their auto loan portfolios without significantly increasing risk.
We’re seeing more lenders looking into alternative data to expand their algorithms and better qualify consumers. Among other criteria, lenders are increasing the importance of income verification, employment tenure, pay frequency and the possibility of employment disruption in their qualification process.