“Perfect” Modern Auto Finance
Learn about the problems of modern auto finance and maintaining perfection. You may be at risk if you do not follow due diligence steps closely. Some lenders never protect their interest by perfecting their lien.
As we talk to VPs of Operations that manage portfolios across multiple asset types, they say that they are seeing a significant increase in the financing of used vehicles. That’s not surprising because it’s so much easier for people to 1) sell their cars through online channels like eBay and Craigslist, and 2) obtain lower cost loans in the current interest rate environment.
Many lenders recognize that these loans take longer to perfect and impose a higher administrative burden. However, they often underestimate the magnitude of this administrative burden. Let’s say a lender your size does an average of 10k person to person loans per month. If we take the low end of the numbers just shared, 25% of borrowers are causing loans to show up on your exception report which equates to 2,500 a month or 110 per day. To handle that administrative burden you either have to hire additional headcount or work your current staff overtime.
Also, while these loans remain unperfected, you are at risk in many different areas if something happens to the asset (like accidents, sale of the asset, the loan going into default, etc.). In the case of an accident, the insurance company pays out based on who is on the title. If your name is not listed as the lienholder, you may not receive the payout without a potential legal escalation.
So what’s the remedy? Well, the best defense is a good offense. Operation managers have found ways to reduce administrative burdens by understanding the root cause of why person to person loans go unperfected longer than other loans in their portfolio. They arm borrowers with the information and requirements needed so that the title gets recorded quickly and properly, regardless of where it’s filed across the nation. This reduces the administrative burden the lender has to do to perfect their loans, either freeing up internal CSR time or reducing the need to outsource to outside vendors. And, what’s more, you provide your borrower with a better experience as they are clear on what is needed to get their vehicle on the road and you listed as the lienholder.
There are ways to reduce time to loan perfection, understand the full cost and improve your borrower experience. Whether in the consumer person-to-person or commercial space, upfront understanding of taxes and fees can be the difference between a smooth process and an unsecured asset.
Our webinar, Estimating Vehicle Title Taxes & Fees on June 14 at 2:00 p.m. ET, will provide insight into the tools that can simply your vehicle title process and save you time. Registration is available now.
June 6th, 2018 by Dan Bucherer