At a Glance
- 46% of vendor finance programs offering deferred-payment structures cannot identify which dealer segments produce the highest first-payment-default rates on those structures over a trailing 24-month window (Secured Research)
- Skip-payment, seasonal, and 90-day deferral programs are routinely approved as marketing concessions rather than evaluated as credit positions — the loss data does not support that framing
- Deferral structures concentrate first-payment-default risk in three predictable dealer profiles, and most programs have never identified those profiles internally
- The funders running deferral profitably treat the structure as a separate underwriting product with its own credit box, its own approval discipline, and its own portfolio surveillance — not as a sales accommodation
The Concession the Credit Committee Never Approved
A senior credit officer at a bank-owned vendor finance group ran an internal review last year of every deferred-payment transaction the program had funded in the prior 24 months. The review surfaced an uncomfortable pattern. Roughly 70% of the deferrals had been granted at the point of sale by a dealer rep, approved by a frontline credit analyst on a same-day basis, and never escalated to the program’s credit committee. The committee had set a deferral policy in 2022 and had not reviewed the cumulative loss performance against that policy since.
The review identified that deferred-payment transactions in the program were running a first-payment-default rate roughly four times the rest of the portfolio. The losses were not catastrophic in aggregate, but they were concentrated in a small number of dealer relationships that the program had failed to flag because the deferral structure had been treated as a sales accommodation rather than a credit position.
