Poor Economy Means High Credit Risk for Car Dealers

There’s no doubt that times are tough with the current economy. Now, the car dealers are feeling the heat. As some people lose their jobs, they cannot afford to pay their bills. For many, this means not paying the loan on their vehicle.

Auto repossessions hit a 10-year high in 2008. Repossession agents have pointed to an average rise of 15-20 percent in the number of vehicles repossessed daily, and repossessions jumped 10 percent in 2007. Luxury cars in particular are being repossessed in large numbers in upscale areas where the housing downturn has hit particularly hard.

The real financial problem lands on the desk of the lender when a customer defaults. The customer files for bankruptcy and the lender cannot collect the money. But, it doesn’t stop there. The auto dealers are having a difficult time recovering the vehicle. The problem is even worse now because it often times starts with a foreclosure on the home. After the home is foreclosed on, the occupants move and take the vehicle with them. The auto dealers / lenders are then left clueless with a non-criminal missing vehicle case they can’t collect on, can’t locate, and can’t repossess.

In a perfect world, every vehicle would have a GPS vehicle tracking system installed on the vehicle prior to being sold to the customer. Unfortunately, this is not the action taken by most auto dealers in the past, and the consequences are significant. However, more recently, many car dealers now see that a GPS anti theft device may be the only proactive approach to a successful and expedient recovery.

In times past, an auto dealer may have been able to choose which vehicle to track based on a customers credit score. In fact, dealers would often lease a car that was equipped with a GPS anti theft device to a person with poor credit when other dealers would not even consider it based on the customer’s credit score. That’s all changed now.

In today’s job market, a person’s credit score will not guarantee job security. A person with good credit that has had a steady job for the past 30 years may be unemployed tomorrow. In some cases, the person with good credit may be at higher risk. For example, people in higher income brackets usually take on more debt. Once the income is lost or reduced, many times people cannot get out from under their debt quick enough, primarily because it’s difficult to sell an upscale home in a poor economy. Therefore, regardless of credit score, auto dealers are faced with the decision to track all vehicles that leave the lot on credit.

It seems that vehicle tracking technology is becoming more popular now that prices are so affordable. Some companies are offering an anti theft device developed specifically for these car dealers. One company offering a device called, “Smart Track,” says the device has no monthly fees and the car dealer only pays a tracking fee if they actually have to track it in the event that a customer defaults.

It seems that no one can accurately predict where the economy is headed. With an uncertain future, the car manufactures got their bailout, and it’s apparent that a vehicle tracking system may be the only bailout for car dealers.

Tags: auto, car, dealer, dealers, device, repossession, theft, tracking