We’ve all heard the news on rising auto loan delinquencies. Since February, auto delinquencies in the subprime market are at their highest rate since 1996. This presents a significant issue since increased delinquencies usually indicate that more defaults will happen down the road. So what are auto finance professionals to do in times like these?
While it may be irresponsible to approve loan applications at higher velocities to borrowers with little or no credit, some auto lending businesses cannot afford to decelerate their loan application approval process, especially during an intensely competitive auto lending climate.
So by all means, step up your loan application evaluations, and accept those subprime deals. But times like these necessitate a smart strategy that cuts costs and mitigates risk as much as possible. Don’t let unexpected losses drive your business bankrupt.
What I often say to finance companies and buy-here, pay-here dealers is this: While you can’t control external forces at hand, you can always shape the battlefield first by mitigating as much risk as possible when it comes to vehicle depreciation and loss. Using GPS vehicle tracking technology as a collateral management solution (CMS) and vehicle recovery tool is really one of the most effective and simple ways to do so today.
GPS technology enabled on your asset is literally the lock on the door — it will allow you to mitigate risk and control the value of your assets as much as you possibly can. It saves lenders money in the long run (collections and guaranteed vehicle recovery if necessary) and reduces the amount of bad debt on the books.
GPS vehicle tracking as a better collections strategy
With a collateral management solution, lenders are able to be more effective in their collection efforts. As auto payments become delinquent, auto finance professionals encounter the loss of loan payment in addition to the cost of collections labor used to recoup debt owed. Accounts are often passed around from one collector to the next, in hopes that one collector will gain some sort of rapport with the borrower or their family.
Some borrowers just may need help with making on-time payments, and this is where CMS can be used to actively coach borrowers on payment. With the device embedded in the vehicle, you can sound a payment reminder to the borrower when a payment is either almost due, due or past due.
While some borrowers are just bad payers and need some coaching to become better, others need a more hands-on approach. The GPS device in the vehicle can shut off the starter when a borrower is consistently delinquent on car payments. Or if a borrower drops or reduces full car insurance coverage to liability only, a lender can disable the starter to limit the risk of the vehicle becoming damaged with no insurance coverage on it.
Shortening the time and eliminating the costs associated with vehicle recovery
Recovering the vehicle asset is the last thing that any auto finance professional wants to do, but it is necessary on occasion. Time is of the essence when it comes to vehicle recovery. The quicker you can recover the depreciating vehicle means less money spent on collection labor, reconditioning and auctioning, and the higher the value of the vehicle assets. Having a GPS device embedded within a vehicle enables you to locate a car within seconds, not hours or days.
Repossessing an asset sooner rather than later will produce an asset with the most amount of value and reduce the deficiency owed by the borrower, with a much smaller delinquent balance that a lender is more likely to recover. Having to recover less money reduces the amount of bad debt, and less bad debt is what most lender businesses need.
GPS vehicle tracking as a solution, not a one-off commodity
I recommend partnering up with a GPS tech provider that takes a solution-based, CMS approach to how GPS technology and software can solve many finance company and BHPH dealer issues — rather than just giving the ability to show a vehicle on a map. Here are some points that you want to evaluate a GPS tech provider on:
A trusted, proven provider with years of history and innovation under their belt.
Rigorous privacy controls that keep your customer data safe and you in compliance.
Powerful software that allows you to easily track and locate vehicles for recovery.
An intuitive user interface that lets you to track, manage and get on with your day.
A provider that listens to its lenders and dealers, adding new features according to their needs.
Reports and alerts that can be easily customized to fit how you run your lender business or BHPH dealership.
A national network of GPS experts who can install at any location in 24 to 48 hours.
Guaranteed vehicle locates at any hour from any mobile device.
Paul Rosenthal is the vice president of automotive telematics solution at Spireon, and has more than 20 years of management in customer service and sales. Previously, Rosenthal managed regional accounts for both CalAmp and LoJack. For more information on GPS vehicle tracking and collateral management, visit www.spireon.com or call at (855) 360-9427.