3 ways to hedge your auto portfolio against losses

Financial institutions and their borrowers are up against challenging times. Many households are facing financial difficulties in the face of high inflation, while financial institutions are struggling to maintain profitability due to economic uncertainty and rising interest rates. As a result, many are focusing their 2023 efforts on reducing costs to maintain returns and supporting their borrowers during these difficult times.

The impact on borrowers has been particularly burdensome—especially where auto loans are concerned—and the cost of vehicles is not helping. According to Kelley Blue Book, “The average new car sold in November (2022) cost $48,681—a record high.” This has left some car owners struggling to make payments as they tap their savings or take out more loans to offset high inflation.

In this blog post, we’ll share three ways you can help alleviate upward pressure on borrowers and protect your auto portfolio against heavy losses.

Reducing Economic Burdens for Lenders and Borrowers

According to the research brief available in the banner below, credit card and auto delinquencies have been up for the past six months. While credit card late payments are still well below pre-pandemic levels, auto loan past dues have essentially returned to those levels seen in early 2020. According to Fitch Ratings, the number of auto borrowers who are past due at least 60 days reached 5.67%, more than twice the amount the same time the prior year.


continue reading »