AUTO LOAN ORIGINATION DATA: HOW TO USE IT TO DRIVE BETTER BUSINESS INSIGHTS

The Federal Reserve Bank of St. Louis recently noted that the consumer price index (CPI) for both new and used vehicles declined in March 2024, after surging in 2022 and reaching a high in mid-2023. According to LendingTree, for the fourth quarter of 2023, the average car payment for new vehicles was a record-high $738 per month, a 2.5% increase from the same period in 2022. The average car payment for leased vehicles increased by 2.4%, while for used vehicles, it increased by only 0.4%.

Overall, U.S. consumers owe $1.607 trillion in auto loan debt in 2024, which is 9.2% of consumer debt, according to Federal Reserve Bank of New York data quoted by LendingTree. In addition, 4.2% of outstanding auto debt was at least 90 days late in the fourth quarter of 2023, up 11.8% from the same quarter of 2022. The percent of auto loans that fell to 30 days due was 7.7% in the fourth quarter of 2023, up 15.8% from 6.6% in the same quarter of 2022. When coupled with analytics technology, auto loan origination data creates detailed insights that allow lenders to understand better why certain events occur, such as delinquent accounts or loan defaults.

Using Auto Loan Origination Data, Lenders Can …
✔ Determine delinquency rates of various dealerships from which loans originate.
✔ Discover the proportion of overridden loans that have defaulted over a specific period.
✔ Identify delinquency rate trends that help determine credit policies or borrower traits contributing to delinquencies.
✔ Provide insights on loan distribution based on age, dealer, loan type, vehicle make and model, or other factors within assorted portfolio segments.
✔ Reveal which underwriting override decisions show the best judgment.
✔ Show when subprime auto loan interest rates could violate state usury laws.
✔ Unveil applicant characteristics of those purchasing specific makes or models of vehicles.
✔ Categorize which auto loans must follow Servicemembers Civil Relief Act (SCRA) regulations.

What’s So Important About Auto Loan Origination Data?

Modern analytical software integrated into a loan origination system (LOS) offers lenders capabilities to evaluate a whole host of auto loan origination data. Lenders can analyze the performance of loan portfolios, specific categories of loans, and just about any data derived from auto loans. Origination data can even be collated into easily understood reports that help lenders track trends within the auto loan market.

By carefully analyzing their loan portfolios, lenders can better determine their performance and where they can be improved. Without utilizing data-driven insights, it’s challenging to discover why certain segments within a lender’s portfolio underperform.

The CFPB & Auto Loan Origination Data

Lenders may soon be able to access more than just their auto loan origination data as the Consumer Financial Protection Bureau (CFPB) seeks to create new datasets to better reveal market trends. This effort will enhance data analytics capabilities, especially for those with subprime credit scores, as many lenders don’t provide data to credit reporting agencies on such loans. As a result, lenders will gain a more holistic view of the auto loan market, with access to more robust origination data affording greater transparency.

Providing lenders with auto loan origination data through such datasets will enable all stakeholders to glean better insights. This will support a more competitive auto market and allow lenders to improve risk management, identify new loan opportunities, and expand credit access. The auto lending industry lacks reliable information on loan delinquencies and how they relate to repossessions, including their impact on borrowers and lenders. With more consistent auto loan origination data, lenders will be better able to correlate how credit scores, income, and geography affect delinquencies.

Tools for Analyzing & Understanding Auto Loan Origination Data

Analytics tools allow lenders to wade through and leverage data that helps them understand trends and make better-informed decisions. To promote growth, lenders need to be able to offer competitive rates and terms. Yet much of the availability for portfolio growth lies in underserved communities and population groups, often involving people with low or no traditional credit scores. However, many potential borrowers without conventional credit histories may offer lenders less credit risk than those with good credit ratings. By developing robust analytics capabilities, lenders can expand the type of borrowers they can approve for an auto loan. Origination data paired with analytics allows auto lenders to target those who are most likely to, and most capable of, paying off a loan.

Creating Insights With Auto Loan Origination Data Analytics

Financial analytics for auto loans used to be the sole domain of highly educated experts with an understanding of both statistics and the finance industry. To sift through large amounts of lending data, analysts sometimes had to use Structured Query Language (SQL) to interpret data and maneuver through databases. With such expertise, analysts could reveal hidden patterns in the data, discovering developing trends and opportunities in the process. Such highly trained individuals were often only affordable by big banks and other large lenders.

Today’s data analytics software allows small and medium-sized (SME) lenders to access and glean insights from data more affordably through enhanced insights into data from auto loans. Loan origination processes benefit from modern analytics software, allowing lenders to analyze large amounts of data inexpensively and compete with larger lenders. This analytics software is available through subscriptions via cloud-based software-as-a-service (SaaS) providers. Regardless of size, it’s more important than ever for lenders to invest in analytics, a critical digital tool that enables lenders to add value to their portfolios without increasing risk.

defi origination solutions have integrated analytics capabilities and Integration Builders for the efficient push and pull of data to and from systems. The defi ORIGINATION Integration Manager consists of an integration library of over 50 pre-built partner integrations and allows clients to build their own integrations.