Vehicle repossessions rose to 1.73 million in 2024—the highest level since the 2008 financial crisis and a 16 percent increase from the previous year. Auto loan delinquencies have also increased significantly, with 8.1 percent of loans at least 30 days past due and 4.8 percent delinquent by 90 days or more as of Q4 2024 (a 15.8 percent increase).
High Costs and Longer Terms Push Borrowers to the Brink
Several factors are driving this rise in delinquencies. The average new vehicle now costs $48,600, with monthly payments averaging $742 for new cars and $525 for used. According to a recent MarketWatch study, drivers now spend 20 percent of their monthly income on car-related expenses, and one in ten drivers spend more than 30 percent on auto loan payments alone. Inflation compounds the issue, straining household budgets and making it harder to stay current on payments.
Longer loan terms now used in nearly 29 percent of new car loans (especially those with terms longer than six years) make on-time payments even more difficult. When financial hardship occurs early in these extended loan periods, borrowers face negative equity, limiting their ability to refinance or sell the vehicle.
BHPH Dealerships Shoulder a Greater Risk
The burden extends beyond individual borrowers, creating increased financial risk for Buy Here, Pay Here (BHPH) dealerships, which directly finance vehicle purchases in-house. According to NIADA, 33.2 percent of used vehicle sales at independent dealerships use this financing method. Since these dealerships bear the direct risk of each loan, they’re particularly vulnerable when delinquencies rise.
To weather this financial volatility, BHPH dealerships must examine the internal systems that directly affect cash flow and profitability—starting with payments. Often overlooked, an outdated payments system can quietly exacerbate financial strain, much like hidden engine issues under the hood of a vehicle.
When mechanics pop the hood of a troubled automobile, they often uncover issues the driver never noticed: leaks, worn belts or misfiring components. Similarly, a closer examination of a dealership’s payments system can reveal hidden inefficiencies silently draining profitability.
The True Cost of Failed Payments
While external factors such as rising delinquencies and inflation are beyond your control, internal inefficiencies, such as problematic payment workflows, poor system integrations and manual processes, compound any external factors challenging your business.
Failed payments, for example, rapidly escalate costs. While a successful ACH transaction typically costs a BHPH dealership pennies, a single failed payment generates an NSF fee plus an expensive customer service interaction, increasing the total cost per failed transaction to more than $20, which is typically a 100-fold increase. This type of unexpected expense quickly erodes profitability and destabilizes cash flow, directly undermining the financial health of your dealership.
The High Cost of Service Calls
Other payment-related issues also significantly impact daily operations for BHPH dealerships, especially within customer service and back-office teams. How many calls does your team field each day from customers who can’t remember a password or navigate your portal? Each of these non-critical calls is costly and eats into your team’s productivity.
According to Gartner, each customer service interaction costs $8 on average, compared to only pennies for a self-service interaction. As these calls accumulate, they substantially increase operational expenses and divert valuable staff time away from critical sales activities and proactive customer relationship management.
Dealerships can realize substantial savings by addressing these call-related inefficiencies. Drive Now Acceptance, for instance, reduced inbound customer call volume by 32 percent after shifting to a modern payments platform that simplified the payment experience for customers.
Manual Reconciliation is Equally Costly
It’s not just your customer service team feeling the strain. Outdated payments technology forces back-office staff into time-consuming manual reconciliation across multiple files and reports from various payment types. With the right technology, BHPH dealerships can connect their payments system directly to their loan management platform, reducing manual reconciliation from hours to minutes. Rather than having to reconcile payments from multiple disconnected sources, a modern integrated payments platform creates a single reconciliation report, automates time-consuming tasks such as sending bulk payment reminders, handling exceptions like ACH returns or card declines, and applying partial payments based on pre-set business rules.
By replacing manual work with modern payments technology, BHPH dealerships save time, reduce errors and improve overall efficiency. The time savings are real: some dealerships report reducing reconciliation time from a full workday to less than an hour.
Future-Proof Your Dealership’s Financial Engine
Looking under the hood of payment systems reveals what many dealerships consider normal operational friction is actually an avoidable drain on resources and profitability. Just as mechanics discover hidden issues that silently damage engines, this examination exposes how outdated payments systems undermine dealership financial health through escalating costs of failed payments, expensive customer service interactions and time-consuming manual reconciliation processes.
As vehicle repossessions reach post-2008 levels and delinquencies continue to rise, it’s time to ask whether your payments system is helping you stay ahead or holding you back. The right platform should do more than process transactions; it should power your dealership’s financial engine.
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Steve Kramer is the Vice President, Product at 
