At the beginning of the COVID-19 pandemic, many people took advantage of low interest rates and refinanced their auto loans. However, we are now seeing an upsetting trend where many auto loans are falling into deferral. With the rise of delinquencies and the increasing inflation rates, auto loan financers need to be aware of what potential steps they can take to protect their interests.
Changing circumstances
When COVID-19 first hit, many people were uncertain of their career status and potential revenue. Many people were not paying for loans because they were on deferral until the full impact of the pandemic could be evaluated. The auto lending industry, however, saw record-high auto loans and refinancing taking place due to low interest rates. Unfortunately, this is now trending in the opposite direction.
With inflation pressures and interest rates continuing to rise, many people aren't paying back their auto loans. This could mean that when loans are terminated through refinancing or trade ins, you may have to pay the dealer to cover the transaction as the dealer's mark is built into the loan. That has serious consequences for auto lending institutions.
In fact, delinquencies might soon reach pre-pandemic levels in the next few months. And if the patterns continue, it could mean that those loss levels might start exceeding pre-pandemic numbers. The subprime 60-day delinquency rate reached 4.92% in June, and it looks as though that might continue to rise to meet 2019's 5% subprime delinquency rate. All of this means auto lenders need to put a plan in place in order to address these delinquency rates before they overwhelm profits.
Auto refinancing services to meet consumer needs
As the economy pivots, your business model needs to move to meet the changing demands. For lenders moving to offer refinancing options or increasing their loans in this sector, this means that there is a heightened need for auto titling speed and absolute accuracy. Auto refinancing has specific challenges that often differ from auto financing. This can include titling for refinanced assets and jurisdictional issues. The pandemic itself and the current economy have added another layer to the complexity in finalizing auto loans, with instances of delays in titling and closures of local Secretary of State offices and Department of Motor Vehicle locations.
With the increase in auto refinancing, lenders are struggling to keep up. Some still work remotely or were not able to scale their teams to support the vast growth we're seeing. They may not have the expertise to keep up with the jurisdictional requirements. Adding to this dynamic, new regulations and obstacles imposed by the COVID pandemic have proven difficult to navigate. Many lenders lack the process automation they need to handle the larger volumes of new work, as well.
At Wolters Kluwer Lien Solutions, we offer auto refinance solutions to meet your needs with speed and unparalleled accuracy, improving your titling ability and delivering the highest level of support for your continual ability to meet the challenges of a changing market. Contact us today to see how Lien Solutions can improve your auto refinancing process.
