Repossession Frequency Continues to Decline for Major Market Players in Q2 2014
September 3, 2014
Banks, captives, and credit unions show sustained improvement as payment performance remains strong
(New York, NY): The volume of auto repossessions by major banks, captive finance companies, and credit unions continued to decrease in the second quarter of 2014, Auriemma Consulting Group (ACG) reported today. Repossession frequency by these lenders, which handle financing for the majority of new cars sold, fell more than 12 percent year-over-year—even as other market participants showed significant deterioration.
The rate, a measure of average monthly repossessions, also declined more than 26 percent when compared with the first three months of the year.
The findings reflect strong payment performance, which has held steady across the prime, near-prime, and subprime segments, and the continued dominance of auto loans in the consumer payment hierarchy. Delinquency rates for accounts 60-plus days past due – the subset most likely to face repossession – remain below pre-recession norms.
“Payment performance continues to exceed expectations as customers prioritize their auto loans over other debt obligations,” said Beth Wells, Director of Auto Finance Roundtables at ACG. “While delinquency and repossession rates may have increased within a relatively small segment of the market, the rest of the financing world is not seeing it.”
Recent degradation has been largely contained to minority players, mainly independent finance companies and buy-here-pay-here dealers. Banks, captives, and credit unions, the segment of the business that controls the majority of auto loan market share, have not seen significant spikes in delinquencies or repossessions.
“These lenders continue to work to ensure new business is booked responsibly,” said Wells. “Risk and originations groups are constantly refining their models, working to put the customer in the right car with the right payment terms.” Wells added that in the event of default banks and captives use repossession as a last resort.
ACG continues to monitor risks affecting the financing industry. The record-breaking drop in delinquency and loss rates has been expected to ease or reverse for more than two years, but improvement has persisted for most of the market.
About Auriemma Consulting Group
ACG is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. Founded in 1984, ACG has grown from a one-man shop to a nearly 50-person firm with offices in New York and London. For more information, contact Tom LaMagna at (212) 323-7000 or firstname.lastname@example.org.