How aftermarket products give subprime lenders an edge


Fueled by off-lease volume and consumer demand, used-vehicle sales are nearing record levels. For lenders focused on used vehicles — particularly lenders with subprime practices — these are opportune times.

However, lenders need to differentiate their services to scale a profit. By leveraging cloud, auto-decisioning and paperless lending technologies, lenders gain a competitive edge with quick responses to loan applications. Lenders should also offer aftermarket options — like service contracts — when appropriate.

Used-vehicle service contracts may not work for every consumer. But, of course, the aftermarket product must be provided as an option and fully disclosed to the consumer, including any restrictions. As an added benefit, service contracts can boost consumer satisfaction.

Lenders with a completely digital loan origination process can easily integrate a vehicle service contract program and make contract execution effortless via paperless fulfillment. Buyers feel better about their purchases, which increases customer retention.

Used-vehicle service contracts benefit lenders and borrowers in different ways:


Few lenders regularly offer the option of used-vehicle service contracts. But lenders who do can set their business apart, making it easy for borrowers to get loans and service contracts from the same provider.

Service contracts reduce delinquencies, defaults and overall lending risk. The aftermarket product also comes into play when borrowers run into car problems that turn into financial emergencies.


When paired with a loan, a service contract is effective the day it’s purchased. With coverage for mechanical breakdown as well as wear and tear, borrowers take possession of vehicles knowing that their monthly budget is less likely to be dinged by major repair bills. The investment in a service contract makes for predictable monthly payments and financial peace of mind.

Lenders that value service contracts can incorporate them easily via cloud integration. Lenders can customize programs to their specifications to best meet their portfolios’ needs. Coverage terms and conditions may be described in months, miles driven or a combination of both. Plus, lenders can add to the balance of a factory warranty or cover specific attributes of vehicles being purchased. Overall, lenders should consider used-vehicle service contracts as a way to reduce risk.

With more than 20 years’ experience in the auto finance industry, Lana Johnson leads the charge to drive innovation as COO at defi Solutions. defi SOLUTIONS is the Technology Partner of Auto Finance Excellence (, a sister service of Auto Finance News.

Source : AutoFinanceNews