Employment status among auto lending hurdles during COVID-19
The COVID-19 outbreak dealt a major blow to large auto lenders’ first-quarter earnings as banks deferred auto loan payments and shifted resources to shield themselves from future losses. As lenders tighten credit access to mitigate the fallout of the coronavirus pandemic on their auto portfolios, finance-and-insurance managers are working overtime to get these customers approved for loans.
The swift descent from one of the longest economic expansions in history to an economy now burdened with the highest unemployment rate since the Great Depression is prompting F&I managers to assemble complicated car deals and figure out how to report employment status on a coronavirus-related job loss.
Employment earnings are further muddled by government stimulus, which when layered over traditional unemployment boosts income for out-of-work consumers so they temporarily qualify for larger monthly payments than they may have otherwise.
Approaching lenders with the most accurate employment data possible speeds the process and can increase the customer’s approval odds, said Jenn Reid, vice president of automotive marketing and strategy at Equifax. The credit bureau maintains a database of income verifications for dealers and lenders called “The Work Number” that it says increases by 40 percent the likelihood auto lenders close a loan.
The added pressure of the coronavirus outbreak is prompting lenders to be more cautious about the deals they buy.
“Things are changing so quickly. In the old days, you could have taken a 30- to 60-day-old pay stub,” Reid said. But in today’s rapidly changing world, many consumers “could have lost their job by then.”
F&I managers concerned about getting customers approved for car loans during this time should reach out to lender representatives for guidance and consider alternative data sources to help customers.