Understanding the Value of “Why”

Simple math 101… fewer defaults equal fewer repossession assignments equal less income for recovery agencies.

GUEST EDITORIAL

I have always been a strong advocate of not only knowing WHAT and HOW but also the WHY. Understanding the reason behind actions or inactions is crucial for transforming challenges into strengths, for turning adversity into advantage.

As most of us in the asset recovery industry are aware, the auto loan delinquencies have reached historic highs in 2025, with subprime borrowers especially affected and overall rates surpassing those seen during the 2009 recession. The subprime delinquency rate (loans overdue by 60+ days) climbed to 6.65% in October, the highest level ever recorded by Fitch Ratings.

In perusing various sources, here are few of the statistics I discovered related to this occurrence which mark the WHAT:

Over 6.6% of subprime auto loans are delinquent by at least 60 days.
Car repossessions in 2025 are projected to hit 3 million, a figure not seen since the 2009 recession.
Auto loan delinquency rates vary significantly across states, ranging from around 3.2% in Alaska, Utah, Washington, and New Hampshire up to 9.8% in Mississippi.

And here is a brief summation I have found of the WHY:

Higher Vehicle Prices: The average price for a new vehicle exceeded $50,000 in 2025, sharply increasing monthly payments for borrowers, especially those with subprime credit.
Elevated Interest Rates: Prime borrowers see rates around 9%, but subprime rates run between 18-20%, making loans harder to manage.
Longer Loan Terms: As prices and borrowing costs rose, consumers took on longer loans, which increases the risk of negative equity and financial strain.
Inflation and Economic Uncertainty: Broader economic instability, inflation, and higher cost of living have squeezed household budgets, leading to rising defaults and delinquencies across nearly all income and credit tiers.
Subprime Borrowers Most Impacted: While prime delinquency rates remain low (0.37%), subprime delinquencies are accelerating, creating stress for lenders and borrowers alike.

By knowing the WHAT and the WHY we may be able to have at least a “fuzzy” look into the broader implications of this phenomenon which could indicate and allow us to prepare for a decrease in recovery assignments in 2026:

All lenders may react to prolonged high delinquencies by tightening borrowing standards, raising costs for all consumers, and making car ownership less accessible for vulnerable groups who utilize subprime lenders.
The surge in auto loan defaults is a signal of wider financial distress, and many economists are very concerned about the risks this poses to consumer credit markets, national economic stability, and the future of auto loans in the coming year.

Auto loan delinquencies have become a key barometer of financial health in the U.S., and their rise reflects broad-based stress within the economy. It becomes very apparent that if stricter parameters are enforced related to borrowers, fewer loans will be made, and the goal of the lending industry of fewer loan defaults will be achieved.

Simple math 101… fewer defaults equal fewer repossession assignments equal less income for recovery agencies. When I attended Military School, one of my instructors, Major Kenneth Blades told me on numerous occasions, “A hint to the wise is sufficient”.

My hint to the men and women in this roller coaster repossession industry, based on the above mentioned WHAT and WHY would be… establish a reserve fund for 2026, watch and cut unnecessary expenses, prepare for the worst and work hard for the best.

Carpe Diem my friends for Alea Iacta Est…

Ron L. Brown

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