Selected by CIO Review as one of the Top 20 Most Promising Automotive Tech Solution Providers in 2014.
By David Meyer, Executive VP
A few months ago, I wrote about the dramatic uptick in vehicle sales and value, particularly with used vehicles, reported between 2011 and 2012. The rise in sales has also been accompanied by an increase in subprime and deep subprime auto financing. So were these numbers just an anomaly — a momentary blip in the market cycle? Apparently not.
A look at the Q1 numbers indicates that the automotive industry recovery is still going strong, especially in the areas of used car sales and subprime financing. Loans to deep subprime car buys jumped in the first quarter — 3.45% for consumers with credit scores of 550 and lower, to be exact. On the other hand, loans to customers with excellent credit scores of 740 or higher dropped off by 3.14% in Q1 as compared to this time last year.
All in all, 35.4% of all open auto loans in Q1 fall outside the prime space. The total dollar volume of automotive loans increased by 9.6% in Q1, growing from $663 billion this time last year to $726 billion. Banks increased their loan portfolios by $20 billion, finance companies by $18 billion, and credit unions by $14 billion.
But before we break out the party hats, let’s take a look at some of the repercussions of this increase in deep subprime financing. Q1 numbers also show a 1.3% increase in 30-day loan delinquencies, a significant 12.4% increase in 60-day delinquencies, and a whopping 16.9% increase in repossessions over Q1 of last year — up from just 0.43% in Q1 of 2012. And while repossession rates for banks and credit unions were down from last year by 14.9%, rates for finance companies was up by 52.1%.
These numbers shouldn’t be too surprising, given the rise in both credit-challenged car buyers and subprime and deep subprime financing. In fact, we recently predicted an increase in delinquencies and repossessions in our white paper “Will You Be Ready for the New Automotive Financing Storm?”. The rise in delinquencies and repossessions remind us of the immediate need for a strategy that mitigates risk and protects vehicle assets as well as profits.
If you haven’t put this strategy in place yet, now’s the time to do it. GoldStar GPS and LoanPlus CMS offer a simple, flexible, powerful and cost-effective solution to capitalizing on the growth of subprime financing and used vehicle sales, while also reducing the risk and costs of delinquencies, defaults and repossessions. I invite you to visit the GoldStar GPS and LoanPlus CMS websites to find out how.