Auto finance

Using the Beige Book to predict the future of auto financing

Crystal ball Image by ojosujono96 on Freepik

The news is always about current car sales, but you know in loan servicing you always have to be looking into the future.

Let's pretend the June 2023 edition of the Fed's Beige Book is a crystal ball and see what it's telling us.

The present

1. Delinquency rates rose and “contacts cautioned that the average loan-to-value ratio on outstanding used-car loans has risen to about 120%, presenting potential risks to the auto finance market."

2. The dynamic between availability and price continues to impact consumer demand, though not always in predictable ways. The Beige Book saw high used prices (coupled with improved incentives) driving some consumers to new cars, and others opting out entirely.

3. Tightening credit caused loan demand to fall off in many regions.

Source: AutoCreditInsight by S&P Global Mobility, TransUnion

The future

So what does that tell us?

Near future: We're going to need to figure out a way to manage delinquencies while wrestling wtih staffing pressures.

Far future: We'll have a dip in new financing to service, meaning we couldn't support increased headcount even if we could hire anyone.

What to do about it

The answer: Whether you're concerned about overstaffing or understaffing, you can use generative AI to:

Oh, and you can use all of those tools to deliver business insights to improve agent performance, payment discussions and rates, and move your team forward no matter what sales are doing.

Planning for the future can help your auto finance team get ahead - no crystal ball required.