Technology has allowed consumers to become more knowledgeable about their credit scores, and thus more delinquent buyers are choosing to turn their car in when they can’t make a payment, rather than take the credit hit of a repossession, said Robert Wagner, collections and repossessions manager at Kinecta Credit Union.
“People are proactive, they are getting their Fico score and engaging,” Wagner told Auto Finance News. “There are people defaulting who are smart enough to go ‘I know I can’t make my car payment, but I want to give my car back and satisfy the debt, because I don’t want the repo to hit my credit bureau.’ That’s a crazy behavior that wasn’t happening just 10 years ago.”
Delinquencies across the credit spectrum have been on the rise at nearly every auto financing company, however losses have not followed suit to the same degree, according to a variety of earnings reports and data from Fitch Ratings.
While Kinecta’s most recent data was not made available, Wagner said the company’s portfolio has followed that trend with overall charge-off rates remaining relatively low, in part because consumers are more aware about how a repossession can impact them.
Still, borrowers abandoning their debts remains a challenge in repossessions, Wagner said.
“Skippable collateral is a cost to all lenders, so you have that to deal with,” he said. “As I talk to my friends around the industry, skippable collateral is a standard piece of business. They write off $50,000 to $100,000 each month.”
License plate recognition, GPS tracking of connected cars, and new forms of communication are advancing and making repossessions easier, Wagner said. However, there is still a mentality in the U.S. that says it’s OK to skip out on your debts, and that’s something that can’t be solved by technology, he added.
Learn more about the tech and disruption in the industry at Auto Finance Innovation 2017, May 17-18 in San Diego. Visit www.autofinanceinnovation.com and to learn more about the Auto Finance Risk & Compliance Summit, visit www.afrcs.com.
