Consumers are relying more on retail installment contracts and leases to acquire cars than they were eight years ago, yet many might not be as prepared as they should be going into the purchase.
However, the silver lining is that the vast majority appear to take those payments seriously once they’re in the deal.
This, according to separate studies from Instamotor and Experian Automotive.
In a presentation shared at the NADA Convention & Expo last month, Experian said 85.2 percent of new-car buyers relied on financing or leasing to fund their purchase in October and November.
Just 14.8 percent used cash.
In the fourth quarter of 2008, 77.7 percent used an installment contract/leasing to buy a new car, with 22.3 percent using cash. Those numbers have gradually shifted toward retail deals and leases over the past eight years, according to the Experian data.
The trend on the used-car side is similar, though leasing’s presence is considerably smaller, to say the least.
In Q4 of 2008, 56.9 percent paid cash for used cars, with 42.5 percent taking out a retail contract and 0.6 percent leasing.
In October and November of last year, 49.4 percent used cash for pre-owned vehicle purchases, with 49.8 percent using credit and 0.7 percent leasing.
Preparedness of borrowers
With so much reliance on loans and leasing, one might think that consumers would enter a car armed with things like credit-score information. But data in a study from Instamotor — titled 2017 Car Shopping Trend Report: How Prepared are Consumers? — suggests otherwise.
Instamotor, which surveyed 1,500 U.S. adults in January, found that 50.9 percent of consumers didn’t know their credit scores before buying a car.
What’s more, 71.3 percent of buyers ages 18-24 did not know their credit scores before buying a used vehicle.
In all other age brackets (25-34, 35-44, 45-54, 55-64, 65 and older), the percentage of folks who did not know their credit score ranged from 40.9 percent to 46.8 percent.
Instamotor also shared data on down payments, finding that 56.5 percent of car-buyers paid 10 percent or less of their respective incomes on the down payment of their last vehicle purchase.
Meanwhile, 27.2 percent paid 11-30 percent of their income; 11.6 percent paid 31-60 percent of their income; and 4.7 percent paid 61-99 percent of their income.
“Despite the well-known 20/4/10 rule, most Americans can only afford 10 percent or less for a down payment on a car,” Instamotor’s Julia Mak wrote in a blog post about the study.
“Previous reports state that new-car prices are unaffordable, resulting in consumers only able to afford a low down payment. So while a lower down payment may seem fiscally responsible in the short term, in the long-term car owners are at risk of paying more over time as a result of interest rate and longer-loan terms,” she said.
The Experian data sheds additional light on affordability. Average new-car payments in October/November were $504, with average monthly payment on used cars at franchised dealers coming in at $378.
In Q4 of 2008, the average payment on a new car was $465, with used franchised at $353.
Missing payments?
But here’s a good sign.
Only 12.4 percent of those surveyed by Instamotor have ever missed a car payment, with 87.6 percent saying they never have missed a payment.
Likewise, 90.8 percent of respondents have never refinanced a car loan, with just 9.2 percent saying they had.
But Mak points out in the post that “refinancing doesn’t always mean bad things ahead. If your credit score or interest rates have improved, it makes sense to refinance to reduce the duration of your loan.”
Experian does point out that the percent of contracts 60 days past due has climbed over the past few years. So, finance companies — in general — have aimed to increase the credit quality in their paper.
Terms are also becoming longer. According to Experian, 72.8 percent of new-car contracts were longer than 60 months in October/November, with 62.2 percent of used-car contracts in that ballpark.
In Q4 of 2008, those numbers were at 50.5 percent for new and 42.7 percent for used.
But credit quality is higher for longer terms. Experian said the average score on 73-84-month contract was 682 for new in October/November and 671 for used.
On the new-car side, that’s down from Q4 2008 (694) but up from 681 in Q4 2015. For used cars, that compares to 670 in Q4 2008 and 669 in Q4 2015.
Wise F&I, which offers a full suite of finance and insurance products, announced on Monday that its products are now available to automotive retailers operating on the Reynolds and Reynolds dealership management system (DMS).
Dealers can leverage Wise F&I offerings through the product rating and booking (PRB) tool within a Reynolds DMS. The company explained this seamless access includes Wise F&I’s full suite of branded protection products, including GAPWise, WiseCARE, TIREWise, WiseTVP, THEFTWise and KEYWise.
With online capabilities such as eRating and eContracting, Wise F&I said this new access will provide accuracy and efficiency for the dealer and additional customer support for the vehicle buyer.
“Throughout 25 years in the automotive industry, Wise F&I has focused on providing the best automotive finance and insurance protection products to our clients and consumers,” said Matt Croak, president of Wise F&I.
“We’re pleased to be working more closely with Reynolds and Reynolds and expect this new enhancement between Wise F&I and the Reynolds Product Rating and Booking tool will enable our mutual dealership clients to more easily, efficiently, and accurately offer our branded protection products to their customers,” Croak continued.
In other company news, Wise F&I recently completed integration with OptionSoft Technologies that can allows dealers to access of Wise F&I products through one of the leading menu providers in the automotive software industry.
Wise F&I now has its full suite of branded products including GAPWise, WiseCARE, TIREWise, WiseTVP, THEFTWise and KEYWise, all available on the OptionSoft menu. The integration cab provides up-to-date pricing, speed and accuracy for the dealership.
Croak highlighted that Wise F&I and OptionSoft integration in turn can deliver a better vehicle buying experience.
“We are always looking at ways to create efficiencies and to better support the car buyer,” Croak said. “OptionSoft supports that through our products direct availability on their menu system.”
RoadVantage expands dealer training
RoadVantage recently launched what the company believes is a cutting-edge dealership training program optimized to help stores sell to today’s Internet-educated shoppers.
“Today’s dealership customers are a new breed of savvy — their shopping habits have evolved radically in the last decade,” said Garret Lacour, founder and chief executive officer of RoadVantage. “Dealership practices must evolve accordingly.”
RoadVantage is offering F&I and sales operations training in partnership with The Academy, an Austin, Texas-based training center that has developed a curriculum specifically designed with today’s Internet-educated consumer in mind.
“The Academy's uniquely developed process recognizes that a shift in mentality and focus is necessary in the face of today's more informed customers,” said Tony Dupaquier, director of The Academy. “Post-training surveys indicate that students who attend The Academy experience higher closing ratios, profit margins and CSI scores.”
The RoadVantage Dealer Training Program includes workshops for personnel at all levels within F&I and sales operations. The comprehensive training covers a wide range of topics and can take place onsite at the dealership, or at The Academy’s state-of-the-art training facility in Austin, Texas.
Self-paced online training modules are also offered.
“Everyone knows consumers are researching and shopping online, so it’s time we equip dealers with the tools they need to effectively reach them,” Lacour said. “This is a big initiative of ours. Last fall we created free online videos, available to all dealers nationwide, to drive consumer awareness of F&I programs before they go into the dealership to purchase their vehicle.
“Alongside our free online dealer videos, our new dealer training program is another example of how we are working to help dealers provide a better customer experience,” Lacour went on to say.
The free dealer videos are available on the RoadVantage YouTube channel.
More information on the RoadVantage Training Program can be found at http://roadvantage.com/training.
When the Federal Open Market Committee’s first opportunity to make another interest rate adjustment arrived this week, the Federal Reserve unanimously passed on making another increase, maintaining the target range for the federal funds rate at 0.50 percent to 0.75 percent.
In explaining their decision, Fed officials said in a statement that information they received since meeting in December indicated the labor market has continued to strengthen and economic activity has expanded at a moderate pace. They also noted job gains remained solid, and the unemployment rate stayed near its recent low.
Furthermore, the Fed mentioned household spending has risen moderately while business fixed investment has remained soft. Meanwhile, despite an uptick inflation, the FOMC pointed out the metric remains below its 2-percent longer-run objective.
“Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability,” the Fed said. “The committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will rise to 2 percent over the medium term.
“Near-term risks to the economic outlook appear roughly balanced. The committee continues to closely monitor inflation indicators and global economic and financial developments,” the Fed added.
SubPrime Auto Finance News reached out to KAR Auction Services chief economist Tom Kontos to obtain his reaction to the Fed’s action.
“The latest Fed move is no surprise as inflation and unemployment rates are at comfortable levels,” Kontos said via email. “Considering the uncertainty relative to the new administration’s fiscal policies, the Fed is better off saving monetary policy moves for later.”
As for when those policy moves might arrive, Stifel Nicolaus chief economist Lindsey Piegza added that this week’s announcement did little to shed light on what might be ahead from the Fed.
“Those hoping for even a smidgen of additional guidance as to the timing of the next rate hike were sorely disappointed by today’s FOMC statement,” Piegza said. “Minimal changes to the language relative to the December statement, today’s release simply underscored the continued ‘moderate’ pace of the economy coupled with committee members’ recognition of sizable uncertainty stemming from a new administration in Washington.
“Acknowledging the improvement in sentiment, policy makers were equally willing to point out the still-sluggish level of corporate investment, a disconnect that reinforces the notion that the Fed will not base monetary policy on political promises alone but wait until the impact of said policy has trickled down into the economy with a presumably positive effect,” she continued. “After all, as noted in the December FOMC meeting minutes, depending on the mix of tax, spending, regulatory, and other possible policy changes, economic growth could turn out to be faster or slower than currently anticipated.
“For now, with a number of question marks from a fiscal standpoint, and still a lack of clear direction in the underlying economy, most committee members appear well suited to err on the side of caution, waiting on the sideline for additional information on how the U.S. economy is evolving in the New Year,” Piegza went on to say.
GWC Warranty, a provider of used-vehicle service contracts and related finance and insurance products sold through dealers, recently announced the addition of three executives to bolster its sales and operations teams.
Joining the sales force are Sarah Messmann, who has been appointed the new area vice president of sales for the company’s Western region, and Jeremy Beck, who has been named area vice president of sales development.
Meanwhile, GWC Warranty also appointed Richard Gesler as the company’s new vice president of operations.
In her role, Messmann will work with GWC dealer consultants in the western United States to improve existing dealer partnerships and seek new opportunities to help dealers sell more cars by giving car shoppers the confidence to become car buyers.
Beck will oversee all of GWC’s sales training initiatives with an eye toward dealer development, new training curriculum and added dealer engagement.
“Both Sarah and Jeremy are proven leaders with a wealth of experience in the automotive industry,” GWC Warranty chief executive officer and president Rob Glander said. “We’re confident that their arrivals, along with the talented sales leadership team already in place, will put GWC Warranty in position to deliver on our best-in-class promise to more dealers than ever before.”
Messmann joined GWC Warranty following 12 years with Wells Fargo Dealer Services where she served in a variety of high-level sales leadership positions.
Beck brings with him an extensive background in instructional design, developmental programs and retail automotive sales. He most recently held the title of national training manager for Ally Financial.
In his role, Gesler will oversee all of GWC Warranty’s claims, business processing and customer service operations.
“Rich’s proven track record of leadership, claims management and customer service excellence could not be a more perfect fit for GWC Warranty,” Glander said. “The areas of the business Rich will oversee touch our dealer, agent and lender partners as well as their customers on a daily basis.
“We’re confident that he will continue to enhance our top-tier claims team and elevate the best-in-class customer service we commit to deliver in every interaction,” Glander added.
Gesler arrived at GWC Warranty following more than two decades of claims management experience. Throughout his career, GWC Warranty highlighted that Gesler has improved claims performance and customer service at numerous organizations such as Liberty Mutual Insurance Company, Hanover Insurance Group, AutoOne Insurance, Bristol West Insurance and Nationwide Insurance.
With more than 20 years of experience administering used-vehicle service contracts, GWC Warranty has paid more than $400 million in claims to date.
“Gesler’s arrival is aimed at enhancing this already strong VSC operation with a customer-focused approach to claims administration and customer service,” the company said.
The latest dealer survey orchestrated by KeyBanc Capital Markets showed participants ended up being evenly split when describing credit availability to their customers.
According to the survey conducted in December, KeyBanc found that 50 percent said credit availability remained intact during the fourth quarter with the other 50 percent stating auto financing loosened.
That availability appeared to help dealers generate more gross profit in their F&I offices. KeyBanc reported that 80 percent of participating dealers enjoyed a rise of about $50 per unit year-over-year during Q4 with the remaining stores saying their F&I gross per unit stayed relatively flat.
What dealers told KeyBanc reflects how important credit availability is. Cox Automotive chief economist Tom Webb reiterated the point, too, when he conducted his quarterly conference call at the beginning of January.
“Certainly No. 1, retail credit is the lifeblood that keeps the used-vehicle market moving,” Webb said. “It has been extremely favorable throughout this recovery. I think it pulls back a little bit this year, but still to the net positive. We couldn’t have gotten any better than where we were.
“I think interest rates overall will be showing a bit of an uptick. But as the only saying goes, ‘It’s the availability of credit, not the cost of credit,’” he continued. “If there is a little bit of steepness in the yield curve, that actually promotes lending. I do believe portfolios will continue to perform extremely well because of stability in the labor market. We’re actually getting some wage increases, which I think will be better in 2017 than they were in 2016. That’s a very positive thing for portfolio performance. When those loans are securitized, I think they’ll still offer investors a very nice risk-adjusted reward; therefore money will flow.
“Overall I’m looking at it to be a positive market this year,” Webb went on to say.
Dealers evidently agree with Webb as KeyBanc’s survey showed the upbeat sentiment for performance of their used-vehicle departments.
“Used-car trends remain favorable as used-car gross per unit appears to have bottomed out as an average of 60 percent of respondents reported an increase of more than $50 in the quarter,” KeyBanc said.
“And we believe we are approaching a near-term inflection point based on our used-car gross per unit index trend, in part driven by easing year-over-year comparisons,” the company added.
While not mentioned in the KeyBanc report, Webb briefly touched on another part of the dealership operation that has to do with financing. While not giving a specific figure, Webb said the impact of an uptick in interest rates likely means the cost of a dealer’s floor plan is likely to edge higher, as well.
“Most dealers do a very good job of following the velocity theory. They do maintain that inventory turn so it shouldn’t be a major burden,” Webb said. “It would only be a burden for those dealers who have not caught up to the fact that you really do have to turn your inventory.”
Formed through thousands of conversations with the nation’s leading dealership principals and finance companies, EFG Companies finalized four predictions and recommendations for 2017.
President and chief executive officer John Pappanastos summarized the results on Tuesday, saying these insights reflect an air of cautiousness for the F&I market.
But Pappanastos added there are many options for the industry to successfully navigate an uncertain business climate for a prosperous year.
“Even though the election is over, we continue to see a murky forecast for the F&I market moving forward,” Pappanastos said. “Consumers clearly want a new — and at least partially online-buying process. This trend has significant impact for the F&I industry across retail and lending channels.
“We also expect to see credit tightening on the consumer side and a foreshadowing of reduced auto manufacturer incentives for dealers, which will impact their margins,” he continued.
“Finally, we don’t believe federal regulatory oversight will diminish to the level that is being hyped. So, we strongly believe compliance will continue to challenge dealers and lenders,” Pappanastos went on to say.
“All that being said, we believe that the changes transforming the auto industry will create unique opportunities for dealers and lenders to leverage as they look to expand their business,” he added.
Four other executives from EFG Companies elaborated about the thoughts Pappanastos mentioned.
1. Flat volumes, compliance, and customer retention for retail automotive
While Consumer Financial Protection Bureau (CFPB) authority may be up in the air, John Stephens, executive vice president of dealer services, noted that dealers will need to stay the course on compliance for 2017.
“Remember, the Federal Trade Commission (FTC) has jurisdiction over dealers and its operations are not impacted by any potential changes within the CFPB,” Stephens said.
“Analysts are predicting flat unit sales volumes, pushing dealers to maximize their investment by squeezing more profitability out of their F&I operations,” he continued. “Customer retention efforts will increase, prompting dealers to shore up their service drive and fixed operations to deliver the ‘luxury car’ level of service.
In addition, an influx of off-lease vehicles will increase used-car inventory while putting pressure on pricing. Whether purchasing new or used, the customer will be king in 2017,” Stephens went on to say.
2. Return on investment and shorter transaction times key for F&I agents
With dealerships feeling increased pressure, Adam Ouart, vice president of agency services, projected that F&I agents will also experience a trickle-down effect to clearly demonstrate a return on investment for the F&I products they place at a dealership.
“Agents will also feel pressure to help dealers shorten transaction time and pivot their operations to support online transactions,” Ouart said. “Agents will closely monitor their own businesses to keep production levels high and begin focusing more on acquiring new dealership business. “
3. Rising interest rates and portfolio evaluations will challenge finance companies
Regardless of what happens with the CFPB, Brien Joyce, vice president of specialty services, said finance companies will also need to stay the course.
“You don’t stop treating customers right on the off chance that the government might not see your good behavior,” Joyce said. “Increasing interest rates will pressure lenders to tighten lending standards and evaluate other options to protect their loan portfolio outside of APR and loan terms. The same can be said for credit unions and other lenders that offer auto loans directly to consumers.
“I expect more lenders to evaluate how consumer protection products can benefit them from the standpoint of differentiating their institutions from the competition, protecting their loan portfolio, increasing loan volume, and controlling compliance,” he continued.
“In addition, dealers will re-evaluate their lender roster, confirming a broad spectrum of partners that specialize in different credit tiers, and help dealers meet their profitability goals,” Joyce added. “This will put pressure on lenders to evaluate their service model for dealerships and make adjustments to tackle mutual dealer and lender challenges.”
4. Growth and finance company challenges continue for powersports dealers
Although unit sales fell in the second half of 2016, Glenice Wilder, vice president of powersports, is anticipating volume will pick up in February when early income tax refunds arrive.
“There will be a slight growth in the powersports market overall in 2017 with dealers putting greater emphasis on increasing aftermarket income through the sale of F&I products,” Wilder said. “Lenders that remain in the powersports market will want to insulate their loans and may look to offering their own complimentary F&I products.
“As powersports dealers continue to be starved for lenders, up-to-date technology resources, and committed employees, they will pressure their vendors and product administrators to provide outside the box solutions for these obstacles, such as digital F&I services,” Wilder added.
During last week’s industry festivities in the Big Easy, Equifax rolled out solution enhancements with a trio of other service providers — Fiserv, Digital Matrix Systems and Dominion Dealer Solutions.
First, Equifax and financial services technology solutions Fiserv collaborated on an interface between The Work Number provided by Equifax Workforce Solutions and Fiserv's Automotive Loan Origination System. Together, the companies said the solutions can provide faster and more robust income and employment verifications to customers.
Refreshed each pay period, Equifax claims The Work Number is the largest database of income and employment information provided directly from employers and includes records from more than 75 percent of the Fortune 500 companies, including an increasing number of medium-to small-sized employers.
“Fiserv has chosen our income and employment verification solution because it provides instant access to data that can help its customers close deals faster,” said Scott Collins, senior vice president Verification Services at Equifax Workforce Solutions.
“These clients are already using our traditional credit and commercial data and this enhancement will provide a deeper view of a consumer's credit profile and provide a tremendous value to their overall underwriting process,” Collins continued.
Fiserv is one of the industry’s top providers of auto loan origination and servicing systems, completing upwards of 5 million originations on 18 million credit applications on its Automotive Loan Origination System last year alone. The connection to the Equifax database can allow finance companies to secure income and employment data in seconds and help approve applications quicker and limit stipulations.
Charles Sutherland, vice president of product management and strategy within lending solutions at Fiserv, said of the integration, “After surveying the market for a proven partner, it became evident that The Work Number met all of our success criteria.
“Together, these two applications aim to improve the speed and accuracy of consumer originations,” Sutherland continued.
Integration into Digital Matrix Systems
In other company news associated The Work Number, Equifax announced that Digital Matrix Systems (DMS), a leading risk management solution provider, has established connectivity to the credit bureau’s tool to provide income and employment verifications to DMS clients.
Both operations insisted that verifying income and employment can allow finance companies to minimize exposure to fraud. They continued that leveraging data from third-party sources for proof of income can streamline the overall process, resulting in improved efficiency.
Access to The Work Number data will be available through Data Access Point by DMS, a connectivity hub that can offers clients flexibility when using both traditional and alternative data sources.
“We continually survey the market and work with our partners to evaluate new data sources for our clients, and the addition of The Work Number will allow us to provide access to a unique and beneficial data set,” said David Graves, DMS executive vice president.
“DMS and Equifax share a mutual goal — to improve the speed and accuracy of consumer originations,” Graves continued.
Equifax’s Collins added, “Our income and employment verification solution rounds out the DMS offering by enabling instant access to data that can help their clients reach business decisions faster.
“Being in a position to have a more comprehensive view of a consumer's credit profile will help give these lenders greater confidence around credit risk and their customers’ ability to repay,” he went on to say.
Equifax highlights service lane equity mining capability
Furthermore, Equifax also launched availability of PowerLead Offer — a new soft-pull credit-based solution designed for the dealership service lane — that can prescreen customers for potential vehicle financing offers.
John Giamalvo, vice president of dealer services at Equifax, explained that instances where a customer brings a vehicle to the dealership for maintenance or repairs present a unique opportunity to prescreen for additional sales opportunities. Giamalvo noted that PowerLead Offer can enable a service provider to prescreen the customer, either prior to their arrival or on-the-spot, to assess eligibility and terms for a new car firm offer of credit.
When the consumer qualifies, a firm offer of credit can be provided to the customer during the vehicle servicing experience.
“A face-to-face encounter with a customer is a sales conversion opportunity and the introduction of a qualified offer enables the dealership to better maximize every customer touchpoint, even outside the showroom,” Giamalvo said
Dominion Dealer Solutions, a provider of web-based customer relationship management and dealer management system technology, was the first within the industry to adopt PowerLead Offer. The company will leverage the solution as an enhancement to its equity mining platform DealActivator to help increase the unique value it provides to its dealer customers.
“This integration will keep our dealers compliant and their customer’s information secure, while helping to significantly increase the dealers’ equity opportunities in the service lane,” said Alan Andreu, general manager of equity solutions for Dominion Dealer Solutions.
“I am excited that DealActivator can directly offer dealers soft credit pulls with the largest credit provider in the country,” Andreu went on to say.
RouteOne unveiled a pair of solutions aimed at helping dealerships and finance companies complete vehicle deliveries and documents in the showroom or wherever the purchaser might be.
On Monday, RouteOne launched remote document delivery; what the company explained is a new technology that can securely and compliantly give consumers electronic access to their eContracted documents. At the same time, the tool can reduce printing costs and paper shuffling for dealers.
Paradoxically, RouteOne acknowledged the eContracting process still involves paper, and can result in printed review and signed copies of retail and lease contracts. The company noted paper has remained part of the process, in part, because of compliance requirements surrounding providing consumers with copies of their contracts that they can take with them. Previously, the only way to accomplish this requirement was the paper option.
With RouteOne’s remote document delivery technology, the company explained the need to print review and final copies of retail and lease contracts is alleviated.
Now with a click of a button and the consumer’s email address, dealers can send their customers a secure link to access their files.
As an option, customers can review the documents in the dealership on their own smartphone or tablet. They can also log in at home to review, save or print them for later reference.
“We listened, we heard and we responded,” RouteOne chief executive officer Justin Oesterle said. “Our dealers told us they love eContracting, but they wanted less paper. Remote document delivery came from listening to our customers.
“We often refer to RouteOne as the company that is ‘designed by dealers for dealers’, and this is a great example of how we strive to make that happen,” Oesterle continued.
The new technology, led by Toyota Financial Services and Ford Motor Credit, is now available functionality for RouteOne eContracting. As part of RouteOne’s commitment to making eContracting better and better, it is provided at no charge.
In the future, the company added the documents available in remote document delivery will continue to expand as RouteOne continues to advance eContracting.
Details of RouteOne’s new digital retail platform
Meanwhile, RouteOne highlighted its new digital retail services can provide dealerships with an online credit application containing dealer-selected branding along with a mobile point of sale application to accommodate consumers’ growing demands for a seamless transition to, and greater flexibility within, the in-store vehicle purchasing process.
RouteOne wanted to give dealers this easy-to-use technology, allowing their customers to complete a credit application themselves or as guided by the dealer. This process can occur online from the dealer’s website, in the dealer’s showroom, or wherever a deal may happen — from any mobile device.
The mobile point of sale app included in RouteOne’s digital retail services, not only can provide flexibility, but also enables consumers to eSign the credit application. Compliance features, including credit score disclosure notice, privacy policy and identity verification, can be automated for every online application to assist dealers in managing their regulatory requirements.
RouteOne chief strategy officer Todd Mason pointed out that dealers who have made the shift have found that RouteOne’s digital retail services can reduce errors and missing information, which can expedite the deal funding process. The information captured in the online credit application can flow directly into a RouteOne eContract, creating a seamless, digital F&I experience.
“Providing dealers with the ability to conduct business online is not new territory for RouteOne,” Mason said. “However, as the consumer’s journey changes and business models evolve, so will our technology.
“This new digital retail platform responds to the growing need for greater flexibility within the vehicle purchasing process,” he went on to say.
To learn more about RouteOne’s new tool, visit routeone.com/dealers/digital-retail-services.
Whether it’s during an industry-wide conference or in one-on-one client sessions, finance companies often pepper Anil Goyal with questions. The senior vice president of automotive valuation and analytics for Black Book mentioned some common ones such as, “Can you tell me why this segment is performing well? Why not? Where is the supply or demand? Can you tell me how the segment has performed in the past five years?”
To provide finance companies more opportunities to ask those questions — and perhaps more importantly receive what Black Book considers to be reliable answers — the company introduced Visual Analytics, a subscription-based interactive data solution that can enable users to easily unearth and gain insights on outcomes leveraging historical, current and projected vehicle and segment valuation data.
SubPrime Auto Finance News joined the stream of posing questions to Goyal, who shared a demonstration of Visual Analytics during this week’s Vehicle Finance Conference in New Orleans hosted by the American Financial Services Association. Goyal showed how the browser-based application produces information through a dashboard presentation.
The tool can offer metrics going back nearly two decades as well as Black Book projections that look ahead for the next couple of years.
“My excitement is more about leveraging this tool to help deliver insights and inform lenders on where the trends are going to help them make better decisions,” Goyal said. “What’s happened in the last five years, we’ve had such a strong market both in terms of lower delinquencies along with growth and demand coming up and retail values being so strong. It’s all been very positive.
“Now some of those positive trends are turning,” he continued. “Delinquencies are rising and vehicle values are going down. Pent-up demand has been spent. There are more plateauing of those positive trends as some of the negative trends are starting to creep in. That means you need to make smarter decisions. Just being in the business is not enough. You’ve got to get ahead of that competition. You have to understand what your data is saying. You have to know where you can fine-tune your portfolio. That’s where the value comes in.
“Five years ago, it might not have been that relevant because everyone was winning. But data analysis and visually delivering it have been more and more critical for some to say, ‘I get it,’” Goyal went on to say.
Here are six of Visual Analytics’ capabilities and features designed for auto finance company managers and other industry professionals to “get it,” including:
• Realize in-depth market trend analysis to see a holistic picture of the used-vehicle market and see where collateral values are trending historically and current day.
• Detailed residual value projections that offer visibility and forecasting from a predictive modeling approach on individual vehicle models and ranking within segments on where collateral trends are projected to go.
• Gain insight to help fine-tune loss forecasting so that lenders can minimize and mitigate potential loss resulting from falling values and delinquency rates.
• Identify new and emerging opportunities based on collateral trends that show growth potential across each of the vehicle segments, opening up avenues for segment growth in portfolios.
• Understand depreciation trends that are critical to healthy and profitable portfolio growth.
• Explore robust data based on the Black Book’s accurate valuations data.
“If you’re looking for something in this space, we have all of the information right here for you,” Goyal said. “These are the kinds of insights where you would have to get a lot of data and an analyst. There’s a lot of talk about data analytics, but it requires a lot of effort, too. We want to simplify analytics like this and make it available to our lending customers.”
Finance company clients also can upload data to Black Book — sets that do not include personal customer information — and Visual Analytics can run various reports about that credit provider’s portfolio. Goyal highlighted the tool can determine how much exposure a portfolio has to certain segments and even specific models that have gone through various changes involving demand, depreciation and more.
“These insights will really help them understand what’s going on in the market, the history and where it might be going,” Goyal said.
To schedule a demo of Visual Analytics, or to learn more about the solution, visit blackbook.com/solutions/visual-analytics.
TransUnion described how quickly technology is being leveraged dishonestly, putting finance companies into a challenging place of chasing for someone who probably never even existed.
Pat Phelan indicated individuals who are looking to commit sophisticated credit fraud are quickly moving their targets from goods that might cost less than $200 to some of the most expensive vehicles in a dealer’s inventory — and leaving finance companies on the hook for the amount attached to the contract and no collateral.
The senior vice president in TransUnion’s innovative solutions group explained to SubPrime Auto Finance News the concept of synthetic identities.
“What they’ve now discovered is they can take elements of genuine identities, usually around a credit breach or an identity breach, and they can build fake identities and take that to a dealer and drive out with a very high-end automobile. The only people who really suffer is the lender because the car is gone,” Phelan said.
“It wasn’t someone else’s identity. It was a synthetic identity, created for that purpose of committing fraud,” he continued.
Phelan noted that what’s happening now is similar to what’s also known as loan stacking. An individual first might commit fraud through a cellular phone contract, move into credit cards and small bank loans and then on to what he says is the “big-ticket item,” a car.
“It’s really starting to accelerate at the moment,” Phelan said about synthetic fraud happening in the auto finance space. He estimated the activity has jumped by 15 percent during the past 24 months.
Phelan added these crimes happen over a period of time.
“These aren’t done on a Monday to cash out of a Friday,” he said. “There is intense behavioral stuff here.”
In response, TransUnion on Wednesday unveiled IDVisionSM, a suite of solutions providing finance companies with bureau officials think is a holistic approach to fraud and identity management. IDVision is designed to help companies stop sophisticated and evolving fraud while also protecting and restoring their confidence in conducting business.
TransUnion’s IDVision suite is comprised of multiple solutions, addressing a variety of critical issues in the fraud and identity management space. For instance, the Synthetic Fraud Model addresses the key question of whether an identity has been fabricated or manipulated. Digital Verification and Authentication solutions ensure consumers are who they say they are by examining hundreds of digital signals captured during an online or mobile transaction.
IDVision also includes the recently launched Fraud Prevention Exchange, a first to market solution designed to help both established finance companies such as credit card issuers and emerging FinTech lenders combat online first party fraud by monitoring application velocity and reported fraud real-time.
“Fraud today does not just impact businesses’ bottom lines with current customers, it also causes losses related to lost opportunities when frustrated customers walk away, and also from back office expenses incurred to manually review fraud,” Phelan said in a news release.
“The fact that businesses can receive all of the fraud and identity management tools necessary to prevent losses in one suite of solutions sets IDVision apart from others in this growing industry,” he added.
An example of the power of IDVision recently occurred when TransUnion said correctly identified 95 percent of fraud cases for an auto finance company. At an estimated average of $22,000 per loan with no recovery, averted losses would save almost $2 million for every 100 cases. Losses such as this are due to synthetic fraud and fraudulent loan stacking — recent fraud and identity threats addressed by the IDVision suite.
“We’ve seen this behavior is causing major problems, especially in subprime and near-prime where we see some purchaser got a loan and then within 15 days are more than two and a half times more likely to default on payment,” Phelan told SubPrime Auto Finance News earlier this week.
“A couple of months ago, a Russian crime ring was targeting the U.S. lending and had actually hired perfect English speakers,” he continued. “So if there any chance of the loan being flagged, the English speaker would get on the phone and they would be paid bonuses based on the loans given.
“A really big industry has sprung up around this, and it all starts with this compromise of the identity. Once you have that identity started, it’s quite difficult to detect it,” Phelan went on to say.
That’s why TransUnion is so high on its latest tool. Credit bureau officials insisted IDVision brings together robust data assets with advanced analytics technology that links, interprets and analyzes information to discover anomalies and patterns of risk. Finance companies receive actionable alerts and instantly delivered scores so they can make timely decisions.
As a result, TransUnion emphasized finance companies across various industries can identify more good consumers to enable secure, confident and convenient authentication. Additionally, they can detect more fraud patterns at origination, during transactions and by monitoring portfolios — allowing them to improve the customer experience.
“As fraud evolves and becomes more sophisticated, the legacy systems many businesses have in place are not sufficient to detect today’s fraudsters,” Chris Cartwright, president of TransUnion’s U.S. Information Services, said in a news release.
“We developed IDVision to provide greater certainty now, and as fraud evolves — while still meeting the expectations of speed and uninterrupted consumer experience our customers need,” Cartwright continued. “The IDVision suite works to learn and predict patterns of risk to help customers more strategically anticipate tomorrow’s threats by staying ahead of fraudsters today.”
TransUnion recently purchased Phelan’s company; a European firm that specialized in synthetic identity investigation. The acquisition turned out to be a crucial part of what TransUnion is now offering.
“We’ve put it all together for the first time,” he said. “I’ve seen lots of pieces of this. There are lots of companies that do online fraud. I’ve seen some companies that do synthetic fraud and others that do loan stacking. But I’ve seen no company that has all of this in one simple API.”
