The auto finance market has never been more uncertain than it is today. Concerns about rising delinquencies, decreasing vehicle values, and declining sales of new and used vehicles leave many financial institutions feeling uneasy about their auto loan portfolios and their future in this segment.

However, there is some good news in the auto lending industry.

As dealerships close their doors in record numbers, forward-thinking financial institutions are seeking out channels other than indirect (through dealerships) to connect with car buyers who need financing.

Offering direct-to-consumer (D2C) auto loans to consumers online or in bank branches enables financial institutions to earn higher margins while tapping into demand among consumers who may have found their options lacking at traditional dealerships. Online D2C lending is also a great way to reach consumers who purchase cars from online sources — Craigslist, eBay, classifieds — and who would not be reached through existing indirect channels.

As financial institutions position themselves to increase their auto lending market share, they must ensure they have processes in place to make this type of lending efficient, profitable, and less risky.

Many financial institutions, especially credit unions and community banks, are using this down period to review title management processes as another area to re-engineer to be prepared for the volume and nuances associated with D2C financing. By automating time-intensive paper processes such as title management, financial institutions can do more work with less people.

Cautious auto lenders are working harder to create error-free titles up front, rather than later in the loan servicing process, to aid in recovering collateral from delinquencies.

If a vehicle lien has an error, the lender may be unable to repossess the car for remarketing and resale purposes to recoup the cost of the loan. Preventing errors in the first place and rectifying existing ones are simple ways to mitigate the risk of auto lending.

Making the auto lending experience more pleasant for customers should always be a priority for financial institutions, even more so when times are tough. Employees have more time to assist consumers when they are not manually sorting through stacks of paper titles. Advances such as electronic lien and title and other automation initiatives are helpful. Electronic titles cannot be misplaced as paper titles occasionally are — a very frustrating situation for a borrower who has diligently paid off a loan and now wants the title released from the bank.

Financial institutions can make the best of this dire economic situation by looking for creative and cost-effective ways to retool their auto lending operations.

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