Black Book’s latest white paper shows how lenders should be using collateral and residuals in the underwriting process. The paper, authored by Black Book’s Lender Solutions division, is titled “Vision 20/20: Using Residuals To Spot Portfolio Growth Opportunity” and can be downloaded for free by clicking here.

The paper illustrates the importance of how collateral and residuals can help lenders manage risk levels appropriately and confidently, as well as facilitate the ability to identify continued pockets of profitability, particularly for longer-term loans. Despite the Fed deciding against a rate hike recently, this practice will only grow as interest rates eventually rise and lenders need better visibility in determining the position of equity for their portfolio(s).

Access to collateral insight and residual data can help identify the right vehicle or segments, especially in an environment where loan terms are stretched out beyond 60 months. What’s more, collateral and residual data can team together to help lenders identify their tolerable inequity levels and set terms accordingly in order to minimize risk and accelerate profit potential.

Black Book also offers specific vehicle segment examples that show how different vehicles reach a position of equity at different intervals. And while historical depreciation trends can help lenders determine varying degrees of risk for the vehicles in consideration for a portfolio, the paper also shows how lenders can maximize profit potential while minimizing this risk.

“An increasing number of lenders are realizing the importance that collateral and residuals can play in the underwriting process, and it all begins with access to accurate vehicle data,” said Barrett Teague, Vice President of Black Book Lender Solutions. “This practice will only become more important as auto loan terms grow beyond 60-month terms and interest rates eventually rise, placing more pressure on the ability to minimize risk while remaining profitable.”

Black Book’s latest white paper, “Vision 20/20: Using Residuals To Spot Portfolio Growth Opportunity”, can be downloaded for free by clicking here.

Black Book® is best known in the automotive industry for providing timely, independent and accurate vehicle pricing information, and is available to industry-qualified users through online subscription products, mobile applications and licensing agreements. A leading provider since 1955, Black Book has continuously evolved to ensure that it achieves its goal of delivering mission-critical information to its customers, along with the insight necessary to successfully buy, sell, and lend. Black Book data is published daily by National Auto Research, a division of Hearst Business media, and the company maintains offices in Georgia, Florida, and Maryland.