Burke: As delinquencies rise, lenders, dealers working together is the answer

As the president of the National Automotive Finance Association, Matt Burke is stressing collaboration between dealers and lenders as they navigate today’s market with delinquencies rising, fraud threats increasing, and emerging technology.

“One of the things we push at NAF is networks, and a vital part is about growing our collaborative network to bring people in and learn about what they see in the industry,” Burke told CDG News, adding that he wants to see more dealers involved to bring their unique feedback.

NAF is following up its 30th anniversary convention with its Executive Exchange Sept. 16 in Tucson, Arizona, then with Compliance Champions Workshop Oct. 6 in Irving, Texas.

Driving the news: Burke was elected president of NAF during the milestone 30th convention in Irving, Texas, in June.

The association is part of the family legacy, with his father, Steve, being one of its founders.
In business, Matt Burke is the president, COO, and co-founder of auto fintech company Agora, which is leveraging AI and advanced analytics to provide funding to dealers.
He is also the CEO of Center Street Finance, a specialty finance company focused on the non-prime space.

Accessing the market: According to Experian’s State of the Automotive Finance Market, 30-day delinquencies at the end of the second quarter were at 2.3%, a peak from before the pandemic, and have been on the rise since the middle of 2021.

The 60-day numbers are still between 0.85% and 0.9%, but are also higher than at any time since 2019.
For the used subprime space, the 12-month on-the-book rate of 60-day delinquencies has improved in the past year, dropping from 14.2% to 12.88%.

“Everyone is writing about the high delinquencies and trying to diagnose the failures in that space,” Burke said. “Affordability is not a stress we can’t deal with. It’s the additional stress that the prices of cars have not returned to normal after COVID…The prices of vehicles are higher, and the losses are ticking up.”

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Partnership needed: Burke noted that a partnership between dealers and lenders is needed to bring down the failure rate on these loans.

It starts with better data on the front end, he noted, and dealers and lenders working together to “fit the right car for the right customer.”
He acknowledged some tightening in underperforming areas of the market, but lenders are still providing funding at an appropriate level.

“More folks are separating the good and bad loans at origination. We’re growing in the right pockets,” Burke said.

Regulatory landscape: The Consumer Financial Protection Bureau recently made headlines with its announcement of no longer publishing unverified complaints on its site.

The CFPB, which regulates many auto-related businesses associated with lending, including finance companies and buy-here, pay-here dealers, has also seen questions about its funding and challenges to its enforcement by lawmakers.
Burke pointed out that state attorneys general have picked up where the CFPB has left off with regulation and stressed the need for consistency.

“You can’t change compliance with the change of the wind,” Burke said.

Impact of AI: AI is becoming more prevalent in underwriting, and NAF dedicated multiple sessions to discussing its use at its convention in June.

Transparency and the ability to be able to explain outcomes were stressed during the convention.
Burke added, “The use of AI has to be guided by humans.”

Bottom line: As the market navigates increased vehicle prices and other challenges, Burke said that the executive exchange is a great opportunity to bring top minds together to have “candid conversations.”

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