Think about what you might complete on an annual basis. A family reunion? Your personal income tax filing? A visit with your primary care physician?

While perhaps a routine check-up or reconnecting with distant cousins can be successfully accomplished once a year, Black Book senior vice president of sales Jared Kalfus is seeing successful finance companies examine their portfolios much more often than just annually. In what Kalfus described to SubPrime Auto Finance News as an evolving best practice, he explained finance companies are taking a closer look quarterly and even sometimes on a monthly basis.

“I think when you look back at the traditional — and with traditional I mean something not that long ago — it was acceptable to value your portfolio on an annual or even multiyear basis, and then say, ‘OK, let’s base our decisions on this snapshot,’” Kalfus said. “What we’re finding now is that it’s becoming more and more common and therefore more and more efficient and profitable for lenders to value that portfolio on a more frequent basis.

“We use the term, ‘portfolio refresh,’” he continued.

Kalfus recollected back to last January and early February when bitter cold and snow gripped much of the country. He emphasized that if finance companies structured their models based on a “snapshot” taken just before that polar vortex impacted the auto industry in 2014, “you might have been wrecked come the third or fourth week of January.

“What happened there as we all know, that polar vortex pushed back and delayed the spring buying season. It kept people in their houses and delayed them from purchasing new cars. It really played havoc on vehicle values and depreciated those values significantly as a result,” he added.

So this past summer, finance companies turned to firms such as Black Book to increase the frequency with which they examined their portfolios. Anil Goyal, vice president of automotive valuation and analytics at Black Book, acknowledged there are plenty of positive elements helping to push auto financing, such as general economic growth and strengthening employment. But at the same time metrics such as used-vehicle values and contract delinquencies are normalizing, according to Goyal.

“It’s imperative for a lender — to use an analogy — to drive with the high beams on so they can see where the curves are and where those trends are developing so they can react faster rather than get caught flatfooted without knowing the risk,” Goyal said. “A lot of the conversations we’re having are about lenders needing to know where those opportunities are and where those risks are developing in the portfolio.

“You’re going to miss those things unless you’re looking at your portfolio, refreshing and analyzing it and knowing where those pockets are,” he continued. “Are your LTVs appropriate based on what your competition is doing? Are the values getting softer in certain segments?

“Reacting and having the data at your fingertips is going to be the smartest strategy,” Goyal went on to say.

Kalfus emphasized that it’s not too much more laborious for finance companies to make the switch to a quarterly portfolio analysis. He declined to share any specific companies or dollar figures, but Kalfus shared the operations that increased their analysis frequency have seen “significant” improvements.

“With regard to refreshing those values on a more consistent basis, if you’re able to do that monthly or even quarterly, you can pivot and really change your outlook,” Kalfus said. “You can adapt to what’s going on within the automotive sector and at least within the vehicle valuation sector to more effectively and efficiently manage that fleet and portfolio. You can become more profitable as a result.

“We have several clients who have converted their frequency from annual to quarterly and we also have a couple that have actually done a higher frequency than that, to monthly,” he went on to say. “The results have been significant enough that they’re continuing to do and have changed their strategy not just on frequency but they’ve changed parameters in how they’re writing loans as a result of what the data spoke of.”