CAR LOAN MANAGEMENT SYSTEM (LMS) FOR LENDERS

The defi Team defi INSIGHT, Servicing Systems, Simplifying Processes

According to research published in January 2023 by Moody’s Analytics, the price of used vehicles in the United States is now falling. Pandemic-related supply chain issues caused component shortages that limited new vehicle manufacturing, causing the cost of both new and pre-owned vehicles to skyrocket. This was exacerbated by low interest rates that made financing new vehicle purchases more attractive than leasing. In fact, according to a study by Transunion, leased vehicles went from 31 percent of the market in January 2020 to 17 percent in July 2022. With fewer leased vehicles, the price of newer pre-owned cars with low mileage remained high.

With supply chains normalizing, US auto production is only 5 percent below pre-pandemic levels. Though dealers have more stock, higher interest rates have brought new challenges, especially when it comes to auto sales. With the steeper price of borrowing, Americans are also choosing to hold their vehicles for longer, which is already resulting in a smaller pool of potential borrowers and lessees, at least for the foreseeable future. There is good news for lenders who finance vehicle leases, however, with higher overall car prices looking to result in an improved auto leasing market in 2023. With all this uncertainty in the near-to-mid-term, lenders should look to implement car loan management systems that allow them sufficient flexibility and agility to adapt to changing market conditions.

What to Look For in a Car Loan Management System

Technology is central to any car loan management system. Even if using a third-party vendor for loan or lease servicing, such as customer care or collections, lenders should choose a partner that offers the most advanced technological solutions. As with any other industry in this digital age, keeping up with the latest technology will help auto lenders better compete. When looking into lending technology that will support a customer’s financing of any type of car, loan management systems should offer lenders the latest financial technology (fintech) to make servicing loans and leases easier.

Fintech for loans and leases should be able to perform functions such as:  

  • Administering customer accounts for general maintenance of ledgers, posting payments, closing out accounts, and sales-related tasks.
  • Eliminating the need to constantly refresh by updating the system in real time.
  • Giving customer care the tools it needs to provide a lender’s products to customers, a means to capture complaints and welcome messaging to new customers.
  • Managing collateral to close out leases and manage titles, along with handling balloon payments and remarketing of vehicles.
  • Managing defaults with automated, rules-based tools that assist with workflow regarding bankruptcy, collections, and repossessions.
  • Providing lenders with the ability to configure the system and manage customer data without needing advanced technical skills.
  • Routing workflow to remove the need to track and hand off certain functionalities manually.
  • Shortening training times while improving worker efficiency by utilizing a rules-based workflow.
  • Streamlining access and managing changes to user roles via a single cloud-based platform for all loan or lease servicing activity.

Above all, any technology should make it easier for a finance company to provide lending or leasing services for any make or model of car. Loan management systems should also have capabilities for seamlessly supporting leases as well as loans.

Supporting Leasing With a Car Loan Management System

By the end of 2022, leased vehicles had risen to just under 19 percent of the new car market, with forecasts by Cox Automotive projecting new car leases will grow to 21 percent of new car sales in 2023. As high-interest rates are unlikely to drop in the near future, leasing looks to be making a comeback, though it isn’t expected to approach the 34 percent of the new car market leased vehicles had in 2019. Since not every customer will be looking for a car loan, management systems for lenders should feature sufficient versatility for customers wanting to lease instead of buy.

While recent news in the media seems to tout the imminent demise of the US vehicle leasing sector, it’s unlikely that the current downturn will leave a permanent scar. Loan management systems, as a rule, should be able to handle the financing of a leased vehicle as easily as they do a car loan. Management systems should also be versatile so lenders can scale their services and stay at the front of the curve when the economic environment changes. That’s why scalability is so important for any lending software platform.

Scalability In Uncertain Times

Technology and managed services that keep auto lenders agile are key to today’s environment for both vehicle lease and car loan management. Systems that support loans or leases need to allow lenders to easily scale their operations to deal with ever-changing market conditions. This is especially important for smaller lenders who need to scale their operations up or down, depending on the current economic environment.

That’s why digital solutions played such an essential role in the economic shutdowns due to COVID that hit the US economy especially hard in the second quarter of 2020. These contributed to a 38 percent reduction in new vehicle sales throughout 2020, which disrupted both auto lending and leasing. With the volatility of world events that can rapidly affect markets worldwide, lending software platforms will continue to make scalability a key part of their offerings now and into the future.

Managed Services For Car Loans & Leases

While a vendor’s performance needn’t include winning an Oscar, loan management systems require the support of a competent and experienced provider. As a third-party supplier of both fintech and managed services, defi SOLUTIONS offers an ideal balance between cutting-edge fintech and decades of experience in the consumer lending sector. As a software-as-a-service (SaaS) provider, defi offers lenders the agility they need to adjust quickly to changes in the economic climate. A key offering, defi MANAGED SERVICING, helps lenders anticipate their customers’ needs and deliver the right products to them at the right time.

Technological solutions provided via defi MANAGED SERVICES include:

  • Artificial intelligence (AI) features within its platform to assist with a variety of tasks, and that allows for further innovations.
  • Digital intelligent virtual assistants (IVAs) used for certain, or all, customer interactions.
  • Omni-channel solution that allows lenders to communicate with customers through a single hub.

These managed services can be offered as à la carte or end-to-end solutions for customers seeking an auto lease or car loan. Management services provided by defi help lenders streamline their operations, reducing costs by automating processes that allow more optimal use of their workforce. By providing their clientele with a modern lending or leasing experience, finance companies will be better able to achieve their goals, even in challenging economic times.

Getting Started

defi SOLUTIONS offers solutions for a lender’s complete loan or lease lifecycle. Partnering with captives, banks, credit unions, and finance companies, defi’s market-leading solutions help lenders exceed borrower expectations. From digital engagement throughout the lending process, defi sets new standards for flexibility, configurability, and scalability in car loan management systems, originations, servicing, and managed servicing. defi SOLUTIONS has the backing of Warburg Pincus, Bain Capital Ventures, and Fiserv. For more information on our cutting-edge loan management system, please visit www.defisolutions.com.

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