With the average auto loan term at 69 months for new vehicles and 65 months for used vehicles, auto finance collection strategies may be as important as ever. And even with longer loan terms, car buyers are falling behind in their payments. As reported in 2019, there were more than 7 million Americans with auto loans that were 90 or more days delinquent at the end of 2018. Loan payment collection is the top concern of most auto finance companies.
Below are 5 strategies that auto finance companies can use to improve collection of payments.
1. Utilize Data
Data may be the single biggest tool that finance companies have to improve payment collection rates. When a potential customer signs up for a loan, make sure your business has a standardized process in place to gather the necessary personal information you need from them and to verify that the information is valid and up-to-date. Many third-party loan software systems have integrations that can provide additional checks or verification of the loan applicant’s personal data. If you’re using GPS technology to help secure the asset, incorporate the data you receive into your analysis to segment accounts that may have missed payments or are late. Eventually, you’ll want to use all the data at your disposal to find accounts that need help before they become delinquent.
2. Utilize Technology
As with nearly every industry, technology is making auto finance collection easier. If you work for one of these companies, it's important that you are continually evaluating new technology tools that can make collections process go more smoothly. We recommend using technology to automate processes where possible. This can not only free up your employees to take on more accounts, but also help keep things consistent and standardized, a key component of staying compliant with the law. Payment notifications are a perfect example. Using a payment notification technology can ensure your communication with customers is not only compliant but also consistent. GPS is another example of technology that can help improve collections. We recommend choosing an automotive GPS provider that has the data and analytics built into their technology platform that will allow you to identify accounts that may be troublesome before they become delinquent.
3. Be Proactive
While it may seem obvious to anyone who’s ever worked in higher risk auto loans, don’t wait for the consumer to become delinquent before intervening. Typically, there are warning signs that a consumer may be having trouble making their payments. Late or partial payments, or changes in a customer’s communication frequency could be early warning signs. The best way to reduce risk in this type of situation is to be proactive and get in contact with the customer in order to get an understanding of what is going on. Once you know what the problem is you can develop a strategy and take the appropriate action to get them back on track.
4. Use a More Human Approach
With all the technology and automation available to finance companies, human interaction and the use of a more personal approach to collection is often lost. Consumers can easily ignore phone calls, text, and emails from overly aggressive or harsh collection agents. Trying to use a more human approach and treating customers with compassion and respect will often result in better payment collection rates and less hostility and resentment between your business and its customers.
5. Make Sure Your Staff is Properly Trained
Making sure your staff has comprehensive and ongoing training in the latest collections tools and technology is one of the most effective auto finance collection strategies. Does everyone in your organization know how to access and use all the analytics tools available to them? Are they leveraging all of the GPS provider data and other technology in their workflow? Are your staff familiar with the compliance procedures? We recommend setting up periodic trainings, perhaps quarterly, as a refresher for the staff to go over existing policies and procedures and introduce new technology features or processes. Ensuring that your staff is properly trained will reduce issues and improve collections and profits.
As the size and length of auto loans continues to increase collections will become more challenging than ever. While this certainly puts pressure on consumers, it also creates challenges for finance companies and credit unions. Having a strategy in place can help your business reduce delinquent payments and ensure more loans get paid on time.
PassTime offers GPS technology solutions that help auto finance companies and credit unions improve collections rates. Learn how we can help your business.