Stanley G. Schwarz

While most of the nation’s attention recently has been focused on the dramatic implosion of the sub-prime mortgage industry, another prospective economic pitfall looms largely unnoticed as a few financial analysts on Wall Street have been speculating whether or not the sub-prime auto lending industry may unravel just as the sub-prime mortgage industry has done. Yet technology, if properly utilized, can help prevent a further continuance of the recent economic downturn by minimizing the inherent risk lenders face with sub-prime auto loans.

Over the last ten years, auto financiers fell into the trap of meeting sales and market share goals by offering sub-prime auto loans increasingly to at risk consumers. The reasoning behind this trend was to tap into a new market segment that had previously been denied access to new and newer vehicle loans. In addition to the general trend towards the “democratization” of credit, a few unscrupulous automobile dealers began making use of the practice of forging loan documents in order to increase the likelihood that their customers would be extended credit.

For many sub-prime customers, the availability of credit to secure a new vehicle was a welcome relief, and on balance, one can find little cause in arguing that extending sub-prime loans to a cash strapped nation was a mistake. Yet, one would be remiss if they failed to admit that the over-exuberant lending experience witnessed during the last decade has produced its own share of problems, with the net result being a dramatically increased risk to automobile dealers and financiers.

Likewise, where once the problem facing many consumers with poor or no credit history was a lack of available credit, today’s problem is likely to be the terms of the credit made available to them. Fortunately for these folks technology is an asset that can be used to help them overcome the disadvantages presented to them as a result of their poor credit standing. For those of us in the payment assurance industry, the result of the economic uncertainty looming everywhere these days is an increased demand for new technologies to assist in the protection and recovery of our customers’ assets.

This is why GPS tracking systems, along with payment assurance and recovery technologies are increasingly becoming more imperative to the auto lending industry than ever before. These products provide a stable, effective platform to guarantee payment compliance, helping to lower delinquencies, and virtually eliminate repossessions. And in the event that an asset needs to be repossessed, the remote vehicle shutdown and GPS tracking features make the process that much easier and cost effective.

As the trend toward the democratization of credit continues to expand and evolve, new and improved technologies will be needed to assist automobile dealers and lending institutions with the tools necessary to protect their assets. As many will sit on the sidelines, the technological leaders will invest enormous sums of both financial and human capital into new products and technologies in order to best anticipate the growing demands of our customers. The net effect of this emphasis on new product development will be an improved sub-prime lending experience for both consumers and financiers alike.

Stanley G. Schwarz is the founder and owner of PassTime. He has been involved in the specialized auto finance industry since 1990. The PassTime family of products provides lenders, including new car dealers, independent dealers and finance companies, with increased flexibility in the way they manage their vehicles and customers, through payment reminder and GPS tracking technology. Contact this writer.