What Missed Car Payments Can Teach Dealers About Customer Retention

Balaji Sridharan of KredosAi explores what lenders’ communication with customers who miss payments can teach dealerships about building relationships through service.

Dealerships spend a lot of time and money acquiring customers, building relationships, and creating a positive customer experience. But what happens when things go wrong?

Maybe a customer falls behind on their car payment. Maybe they stop coming in for recommended vehicle servicing. How do you approach that customer, and why is it important to approach them the right way?

I think that's an important question because customers have relatively few moments of interaction with the organizations servicing their loans, and usually those interactions happen when something goes wrong. One of those moments is when they're late on payments.

And that's becoming an increasingly important issue. According to Cox Automotive, approximately 1.73 million vehicles were repossessed in 2024, the highest number since 2009.

You have to make sure that communication doesn't come across as one-size-fits-all or more abrasive than it needs to be. That matters if you want to retain customers and foster customer loyalty.

While most dealerships aren't directly responsible for servicing auto loans, there's an interesting parallel between loan servicing and vehicle servicing that I think dealerships should be paying attention to.

Why a one-size-fits-all approach doesn't work

What we typically see in collections is a one-size-fits-all approach, either because organizations don't have the technical capabilities or the resources to be more nuanced. But every customer is different.

Think about somebody who has consistently made their car payments on time and simply forgot one month. Should you approach that person the same way you would somebody who's repeatedly fallen behind on payments? I don't think so.

You need to be sensitive to why you think somebody got late on payments. Have they been late before? Should you take a gentler approach versus a more direct approach? How do you frame the communication? What calls to action do you give them to resolve the issue? And more importantly, what channels do they typically engage in?

These things matter because you don't want to hurt a relationship with somebody who simply forgot to pay a bill by threatening them with actions or consequences that aren't appropriate for that context.

How AI can improve customer engagement

Everybody wants personalization at scale, and the technologies are available today to enable that.

AI can help organizations move away from that one-size-fits-all approach and start learning what customers respond to, what their preferences are, and how to use those learned preferences to enhance subsequent communications.

In auto lending, you can look at a customer's payment behavior, which channels they respond to, and what types of messages are most effective in encouraging them to take action.

But you also need to think about the regulatory implications.

Collections is a regulated industry, and you can't just communicate with people whenever you want. There are constraints around how often you can contact somebody, when you can reach them, and what you're permitted to communicate. Sometimes those regulations are determined at the state level.

Especially with AI, you have to make sure the appropriate guardrails are implemented so you're not overcommunicating when it's unnecessary.

And because those guardrails and constraints exist, you've got to make sure every interaction matters. It's more about the quality of communication than the quantity of communications.

How dealerships can apply the same approach to vehicle servicing

Here's where I think there's an interesting opportunity for dealerships.

Dealers make a lot of money from vehicle servicing. It's a high-margin part of the business. So what happens when somebody falls behind on recommended servicing? How do you nudge that customer into action?

Could a similar approach, where you have a platform that learns what customer preferences are and what they're responding to, be applied in a vehicle-servicing context? I think absolutely yes.

Rather than sending the same service reminder to everybody, a dealership could learn which communication channels an individual customer responds to, what calls to action are most effective, and how to improve subsequent communications.

You could also think about how to innovate with technologies like Rich Communication Services (RCS), which allow for more interactive mobile communications.

More importantly, how do you learn preferences at the individual customer level and then become sensitive to those preferences? That's what I think dealers should be thinking about.

Whether somebody is falling behind on a payment or overdue for vehicle servicing, you want to encourage them to take action while maintaining that customer relationship.

Because every single moment of communication, especially when something goes wrong, is relevant. And making sure you're taking the right approach to that interaction is an important part of retaining customers.