We recently reviewed five challenges the auto finance industry is facing this year. They included:

1. Inflation pressure
2. Increasing delinquency rates
3. Changing customer expectations
4. Staffing issues
5. Inefficient operations

We wanted a deeper dive, so we went straight to the source(s): Mike Lavin, President and COO of Consumer Portfolio Services, Inc., and Pushan Sen Gupta, CEO of First Help Financial, to ask what they’re seeing in their auto financing businesses.

Were our thoughts right? (Spoiler: Nailed it!)

Here’s what our experts had to say.

Delinquencies are happening

Or, as Gupta put it, “Rising delinquencies is going to be the flavor of the year in 2023.”

Rising interest rates are one major reason our panelists saw the threat of delinquencies coming. “One of our biggest challenges,” Lavin said, “is keeping the monthly payment affordable for our customers.” 

Because borrowers' average monthly payment is much higher than the historical average, those obligations have become harder for customers to meet.

Customer expectations

Working in sub-prime auto financing, Lavin explained that CPS generally finds itself at the top of the list of payment priorities.

“But that doesn’t mean we want to create a poor experience for them, because the better experience we can create, the more apt they are to pay us. So that means a frictionless experience.”

(We talked about this in our blog on collecting from millennials, too.)

Gupta agreed. “Make sure that customers have every means to make a payment available to them. If a customer wants to make a payment, it shouldn’t be that I don’t know how to take it.”

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Labor shortages

While both Lavin and Gupta are far more concerned with potential delinquencies, labor issues are definitely on the list of challenges.

“It is a problem, but there are ways to work around that,” Lavin said.

Both companies have both embraced remote work, which allows them to hire nationally as well as see significant savings on real estate. They also both see offshore/nearshore/international solutions as a great answer.

More on that right now...

How to overcome auto finance ops challenges

You can’t change the accounts you’re dealing with in the short term, Gupta pointed out. “By the time the issue comes to the surface, you already have the book you have. So you have to think a little bit ahead to be able to overcome the challenges that come up.” 

The suggestions Lavin and Gupta have for addressing auto finance challenges are a Venn diagram centered around smart hiring and smart use of technology.

“On the delinquency side, what we’ve been saying since last year: Staff up. Have enough people to make outbound calls. Use technology to prioritize the customers that need to be contacted,” Gupta said.

There are two ways to deal with staffing issues, Lavin said. One is to increase numbers where you can. “We have a nearshore platform, which gives us the ability to scale up quicker and hire 100 agents in 45 days, which you can’t do domestically.”

“The other,” he added, “is to leverage technology to get more out of the collectors that you have. We are adding Prodigal. We think part of the ROI for that product is to allow our collectors to make more calls per hour. And when you do the math on 500 collectors, that ramps up pretty quickly.”

“The only way to stay ahead in the game is to adopt and assimilate whatever technology you can find,” Gupta summed up.

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Want more? Catch the full webinar: