Auto Lenders Bracing for Increased Defaults
Auto Finance
Nov 06, 2023, 17:41 ET
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Auto Lenders Bracing for Increased Defaults
Of the not insignificant number of silver linings that came out of the COVID era, one was a boom in auto lending and a significant reduction in delinquencies and default in that business.
That began to change earlier this year and is now being viewed by many auto lenders as an emerging problem.
Cox Automotive reported back in February that the rate of vehicle repossessions was up 20.4% year-over-year. By June, the same researchers reported that the COVID-era was over, at least as far as the auto industry was concerned, and loan defaults and repos had returned to historical norms.
While some looked at this information with great alarm, NCCI customers have largely been returning to their best-practices approach to dealing with auto loan default.
Back to normal for auto loan default
Consumers didn’t take long to adapt to the government’s actions to limit the negative impacts of the pandemic. With the housing industry forced to put delinquent borrowers into forbearance programs, consumers spent their government stimulus checks on new cars.
Unfortunately, supply chain issues conspired to make it impossible for auto manufacturers to keep up with the demand. Today, production is meeting demand, for the most part, as the auto industry normalizes, but the government stimulus checks and home mortgage payment moratoria are over.
As NCCI President Matthew Preuss puts it: “It’s time now for auto lenders to get back into the groove of effective loan servicing, which is exactly what our clients are doing.
For most lenders, that means staying in touch with borrowers, paying attention to missed payments and reaching out at the first sign of trouble. That’s where the NCCI team often comes in. With thousands of field services professionals across the country, NCCI can put the lender’s information into the hands of their borrowers.
Often, according to Preuss, this makes all the difference and gets borrowers back on track before the lender has to repossess the vehicle.
For more information about how NCCI can make servicing your auto loan portfolio more effective, reach out to us today.
