Categories
Economy

Protecting Your Loan Portfolio from Auto Defaults

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
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.

Categories
Business Growth

Consumer Communication

Contributing Author: Brien Joyce

 

Contributing Author: Brien Joyce, Vice President, Specialty Channels, EFG Companies

Ask yourself the following questions:

  • How often are your indirect auto loans refinanced within the first 30/60/90 days?
  • Do you consider your offering equal to, or more competitive than, the competition?
  • What differentiation does your offering provide to cut through the clutter and drive auto loan growth and retention?

With a dense auto lending environment from captives to credit unions, dealerships have had their pick when it comes to choosing which loans to push. In fact, dealerships have reduced the number of lenders they work with. According to a recent study from Dealertrack Technologies, the average number of lender relationships has dropped to between 6.9 and 10 lenders. With that in mind, lenders have vied to provide consumers with low rates and dealers with high margins.