The automotive industry is experiencing a dynamic period marked by both positive sales activity and underlying economic uncertainty. Recent months have shown a surge in retail vehicle sales, driven by consumers proactively purchasing vehicles in anticipation of potential economic shifts. However, this trend is juxtaposed with weakening consumer spending and declining sentiment, suggesting a mixed economic outlook. Adding to the complexity, a reduction in the supply of both new and used vehicles from 2024 has contributed to higher prices, impacting consumer affordability.
The subprime auto lending market, catering to borrowers with lower credit scores, faces significant challenges as delinquency rates rise. Inflation and high interest rates have exacerbated financial difficulties for these borrowers, leading to increased rates of loans at least 60 days past due, with some reports indicating this rate is at a multi-decade high. This trend, driven by both macroeconomic pressures and the potentially strategic decision of some borrowers to walk away from existing high-interest loans in favor of new, lower-rate options, has prompted lenders to tighten credit standards and reduce exposure to the subprime segment. This tightening makes it more challenging for low-credit individuals to secure financing.
While digital solutions like eContracting and digitalization in securitization markets offer efficiency, direct mail provides a unique opportunity to stand out from the digital clutter and create a tangible, memorable connection with potential buyers. Consumers are increasingly overwhelmed by the volume of digital ads and emails they receive daily, making a well-designed piece of physical mail more likely to capture their attention and lead to engagement.