How Analytics Help Lenders Identify Subprime Opportunities at the Dealer Level

Subprime auto loan volume and market share has continued to decline this year, illustrating that auto lenders may be tightening lending standards. As lenders consider which loans to approve, they should use analytic tools that widen their opportunities and better understand which dealers offer the best potential for their book of business.

According To Most Recent Equifax Data on Subprime Activity:

--871,900 auto loans and leases have been originated YTD to consumers with a VantageScore® 3.0 credit score below 620. These are generally considered subprime accounts.

--This is an 8.7% decrease from February 2017. These newly-issued loans have a corresponding total balance of $15.3 billion, an 8.7% decrease year-over-year.

--Through February, 21.3% of auto loans and leases were issued to consumers with a subprime credit score. This is the lowest subprime share on a seasonal basis since 2006. In 2017 the YTD share was 22.2%.

Risk, Even SubPrime Risk, Varies Between Dealers

Lenders need analytics platforms to determine which dealers are a better fit for their book of business and provide the right amount of risk for their appetite. Equifax recently analyzed TradeSight metrics evaluating a series of dealers with a focus on Subprime accounts. Below are two dealerships ("Dealer A"; and "Dealer B") with side-by-side comparisons that look at a handful of credit performance criteria, such as delinquency rates, average APR, and length of loan (Months on Book).

According to the data below, Dealer A shows a higher propensity for customers with 30+ and 60+ delinquencies, as well as charge offs. However, Dealer A also represents clientele with higher APR rates. Based on this data from platforms such as TradeSight, lenders can best analyze which loans and dealers make up the best opportunity for their book of business based on a number of credit performance and risk assessment data.

 

Item

Dealer A

Dealer B

C/O Repo at Month 14

3.80%

3.60%

C/O Repo at Month 22

12.00%

5.20%

30 Days Delinquent Month 18

36%

11%

60+ Days Delinquent

18%

8.20%

Average APR

12.70%

9.50%

 

560 - 580 credit range

 

Please let me know if we can schedule an interview to discuss further, or let us know if we can author a by-lined article addressing this scenario in greater detail?

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