Despite widely varying outlooks on the health and viability of the U.S. economy, consumers continue to feel the squeeze of stubborn inflation, especially for housing, food, and other essentials, and it shows in the real-world effects on the subprime automotive finance marketplace.
Late last month, Americans defaulted on their subprime auto loans at levels not since 1994, according to Fitch Ratings data. The Federal Reserve’s unprecedented rapid increase of interest rates means subprime buyers are now paying between 14 and 22 percent interest on new and used cars, respectively.
Data and statistics about subprime used vehicle buyers and the finance markets serving them can be extrapolated to the buy here-pay here marketplace. The news isn’t great.
The percentage of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September — up from a previous high of 5.93% in January, according to the business news publication Bloomberg.
Successful subprime finance companies and buy here-pay here dealers have long understood the importance of using GPS tracking platforms and the data they generate to monitor, locate, and recover their financed collateral. The worrisome trends of record-high delinquencies and the prospect of continued Fed interest rate hikes make it more important than ever to have the right technologies in place, provided by a company that genuinely understands the subprime and deep subprime markets.
The last outcome a finance company desires is a repossession. Cashflow ceases, and expenditures mount with each passing day. Repos, however, are inevitable in this business. Financial success for the lender means keeping delinquencies and repos at a minimum and recovering collateral quickly and efficiently.
Leveraging Advantage Automotive Analytics offers a strategic approach to tackle these challenges head-on. The company, created by pioneers in the telematics industry with first-hand experience in the subprime finance business, provide clients with a robust platform that generates crucial insights and tools to navigate the challenges presented in the current economic landscape.
Advantage plays a pivotal role in not only minimizing the expenses of a delayed repo but also in mitigating the impact of escalating loan defaults and delinquencies. Its wealth of data analytics can also assist with when to pull the trigger on a repo and future funding decisions.
The platform enables lenders to closely track the status of financed collateral in real time, providing valuable data on location, condition, and consumer information. This mitigates the risks associated with defaults and allows for transparency and accountability between lenders and borrowers.
Unfortunately, in the current economic environment, there will be more repos than lenders want. For those new to the BHPH business, it will likely be more repos than they’ve ever experienced or foresaw. Having data stored about the vehicle’s likely whereabouts, at what time, and travel patterns will significantly assist the recovery professional in their efforts to recover your valuable collateral.
Armed with comprehensive data analysis, lenders can make more informed decisions on when and how to initiate the repossession process. By considering factors such as payment history, credit scores, and market conditions, lenders can ensure that repossession actions are conducted judiciously and only as a last resort, minimizing the impact on struggling borrowers.
Advantage’s advanced analytics solution offers lenders a vital framework to navigate the current financial landscape responsibly by improving collateral monitoring, asset location, and repossession strategies. Leveraging our platform is now essential for a sustainable and secure finance portfolio.