Lenders use alternative data to expand auto books
Q1 automotive loans fell 2% YoY to $81.5M
Auto lenders in the first quarter leveraged TransUnion’s alternative data and underwriting models to expand their lending pools as the market continues to navigate limited inventory and elevated vehicle prices.
The alternative data sets allowed lenders to reach consumers they otherwise wouldn’t lend to in order to grow their portfolios, Satyan Merchant, senior vice president and automotive business leader at TransUnion, told Auto Finance News.
“Moving beyond the traditional data sets … lenders have explicitly said ‘we want to use [TransUnion’s] more sophisticated, alternative data sets so that we can lend in communities we don’t lend in primarily,’” Merchant said.
Industrywide, auto loan volumes fell 2% year over year to $81.5 million in the first quarter, prompting lenders to expand their reach, according to TransUnion’s Credit Industry Insights Report. As loan volume dipped, lenders looked to new strategies to reach more consumers while also increasing financial inclusion in underserved communities.
Lenders “want to improve access to financing for the broad base of Americans … and using alternative data allows lenders to get a deeper insight into consumers,” Merchant said.
Meanwhile, monthly payments on vehicles climbed 13% YoY to $556, according to the report. As a result, lenders are offering longer lease terms in order to obtain more loans on their portfolios.
Looking ahead, rising car prices and supply chain challenges are likely to impact consumer purchasing power in the coming quarters, and lenders will continue to lean on alternative data to enhance loan volume, Merchant said.
Editor’s Note: This story was previously published on Bank Automation News’ sister site, Auto Finance News.
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