Credit Acceptance Corp., the lender to car buyers with subprime credit scores, warned it’s seeing a sharp drop-off in payments as people shift their financial priorities to get through the coronavirus pandemic.
As unemployment soars, borrowers are putting off payments or “reallocating resources,” Credit Acceptance said in a regulatory filing Monday, explaining that it needs more time to publish a quarterly report. New lending is also slowing as dealerships across the U.S. are forced to shutter their showrooms, the company said.
“A continued disruption in our workforce, decrease in collections from our consumers or decline in consumer loan assignments could cause a material adverse effect on our financial position, liquidity and results of operations,” Credit Acceptance wrote.
The firm is among the first to report an uptick in delinquencies as some lenders offer forbearance, hoping that what consumers need is time to get through the pandemic so they can resume payments. Ally Financial Inc. said on Monday that about 25 percent of its auto-loan customers have taken advantage of its payment-deferral program.
Offering forbearance can make it harder for shareholders and analysts to gauge the degree to which borrowers are unable to pay. The filing by Credit Acceptance shows some consumers already can’t keep up — evidence of more trouble ahead for auto lenders.