In the past two years, lenders have focused on both retail customers and dealer clients to stem losses and improve operations. Specifically, lenders have tightened underwriting guidelines — raising credit-score minimums, lowering loan-to-value ratios, and shortening loan terms. On the dealer side, financiers are keeping tighter tabs on titling efforts and more closely monitoring dealer stats.
From what I can glean so far, it seems like the consumer-facing changes are working. Delinquencies and losses are coming down, and loan quality is noticeably improved. If lenders stick to these new guidelines, they’ll be booking loans with performance trends better than they’ve seen in years.
What I worry about, though, are the dealer-related efforts. Certainly, they’re a start. But from news I’ve seen lately about more dealerships shutting their doors and increased scrutiny by state attorneys general, lenders had better not let down their guard. In fact, when it comes to dealer scrutiny, lenders might need to redouble their efforts.
