It’s been a decade since the housing market’s epic collapse and there is quite the debate as to whether or not the subprime auto loan market is now on the brink of a similar disaster. While it won’t send the global economy into a tailspin, it could greatly affect dealers and finance companies.
No matter which side of the debate you’re on, from John Oliver’s recent lambaste on the subprime auto market or on the opposite side of the spectrum, it’s time to consider the necessary steps you can take now to increase your business’s chance of success in the future.
To create the right foundation for your business future, you need to know your market and buyer, and of course, you need to protect your most valuable assets.
Let’s take a look at the statistics when it comes to the subprime auto loan market.
- They represent 30% of the total consumer universe.
- They account for 20% of all auto loans.
- Their average interest rate is at least 5% higher than those with good credit
- Their average loan term is 72 months.
- And the average used car is financed for $16,335.
As you can see, subprime buyers pay more for longer and comprise a significant slice of the consumer universe. And whether their loan term is 3 years or 6 years, there’s no way to predict the future or their ability to continue paying on their loan. With an average of $16k on the line, that’s a lot of risk.
So are you prepared for subprime buyers? Remember, that’s 20% of all auto loans, and yes, there’s definitely a potential that some of those loans could go into default. If you’re not prepared, then it’s time to take control of your business and its future. Here’s how:
Choose the Right GPS Vehicle Tracking Partner
Not all GPS vehicle tracking providers are created equal. Almost half of new automotive GPS providers entering the market over the past ten years have gone out of business, so it’s vital to find one with industry longevity and one that is invested in helping protect your businesses for the long-term.
Decrease Late Payments & Collections
With the right GPS partner, GPS devices and SaaS, you have the tools you need to motivate subprime buyers to keep up with their payments via reminder alerts, and if needed, starter disable features. Knowing that the car they purchased has these capabilities greatly increases the likelihood that the buyer will make their vehicle payments a priority, and ultimately encourage them to improve their credit.
Recover & Resell Quickly
If the auto loan market changes and defaults become the norm, surviving the risk means getting your vehicles back and returning them to lot inventory quickly. Again, it’s all about finding the right GPS provider. No long, drawn-out searches by your agents. No vehicles disappearing for months on end or sitting in impound lots. Just one-click locates for easy, less costly recoveries.
GPS Tracking Is Good for Your Business
Plain and simple. If you’re running a business in the subprime auto lending space, you need to make sound financial, operational and business decisions, and GPS tracking is one of those. Spireon is the leading provider of GPS-based vehicle telematics and Business Intelligence solutions with over 3 million active subscribers. Spireon empowers dealers and lenders to maximize productivity, make more money, protect assets and reduce liability as a CFPB compliant partner.
Enjoyed this article? Stay up-to-date on latest industry trends and insights from Spireon’s EVP, David Meyer!