The Canadian automotive industry is entering a period of transition. New car sales are falling from their previously torrid pace and more consumers are selecting leasing as an option when loan terms shorten. Used cars and certified pre-owned vehicles remain popular, but, along with the rise in leasing, this has implications for lenders. Understanding the potential impact on portfolio volumes and delinquency will become increasingly important in the months ahead. A review of Equifax and Dealertrack information shows:
New auto financing volumes are slowing significantly and will constrain portfolio growth through 2019, delivering greater competition for new deals and increasing need to deliver better customer experiences.
Auto finance delinquency rates are already edging higher. The impact of longer terms and high loan-to-value in recent years will weigh on recoveries as losses rise.
New underwriting approaches that account for key attributes of the deal will allow for a stronger alignment between revenue and losses.
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