Auto lenders come in all shapes and sizes including banks, credit unions, and auto dealerships. A common thread between them is the risk of a repossession. With the question of risk comes the question of risk mitigation. How can I reduce the risk of repossession and the associated losses? This article focuses on reducing the losses of repossession.
It’s important to first understand the landscape of auto finance in terms of repossession risk. The statistics for 2020 are greatly affected by the COVID-19 virus that shut down the economy in the United States. The first half of 2020 saw unemployment claims reach record levels and about 3 million auto loans in default (TransUnion). For the full year of 2019, about 6 million Americans were 90 days or more behind on their auto loan payments (CNN).
The top 10 lenders have about 30% of the market share in auto loans (Manheim). That leaves 70% of all auto loans in the United States to smaller financial institutions and auto dealers. While all lenders need to control costs, the need to assist smaller, resource constrained lenders is apparent.
What are the choices of a borrower who is facing repossession? The borrower can ask the lender for help, voluntarily surrender the vehicle, or ignore the situation entirely. Ideally the borrower will ask the lender for help and an agreement can be reached to minimize lender losses. Unfortunately, this scenario cannot be counted on and is unlikely to occur. A voluntary surrender is the next best option, but this is even less
likely as it makes little difference, versus a repossession, on the borrowers credit report. He or she may as well keep driving the vehicle for as long as possible.
The most successful lenders will prepare for the worst case scenario, a repossession. The lender’s repossession costs can include skip tracing, vehicle recovery, vehicle storage, locksmith fees, personal property returns, possible damage or liability claims, and auction fees. These are only the repossession costs and do not account for the biggest loss of all, the missed payments!
There are a few ways to minimize these costs including the use of GPS trackers, which many lenders have already discovered. Is there a better way? Is there a way to recover the vehicle faster? The faster the vehicle is recovered, the less money spent on repossession, but more importantly fewer losses on depreciation, interest, and principal. The key is to save time!
Black Diamond Recovery focuses on the fastest turnaround time possible when working with lenders. Our professional team eliminates the overhead associated with many other repossession agents in both administration and field recovery. Our response time is unbeatable and the result is a faster recovery process for lenders. Contact us 24/7 for a quote and more information.