While also touching on how the subprime auto finance company is navigating challenges in both collections and rolling out securitizations, Consumer Portfolio Services highlighted that it closed the first quarter by originating the most contracts ever in a single month.
During Q1 of 2016 that closed on March 31, CPS purchased $312.3 million of new contracts compared to $269.2 million during the fourth quarter of last year and $233.9 million during the year-ago quarter. During the company’s quarterly conference call, chairman and chief executive officer Charles “Brad” Bradley Jr. wasn’t sure whether it was solely tax refund monies that pushed CPS to originate a record amount of paper in March, which happened to coincide with the 25th anniversary of the company.
“It’s really hard to figure out, and to be honest, I don’t know that we really care,” Bradley said.
“What we care is we’ve got a nice little kick in the first quarter, which we didn’t have in the previous two years,” he continued. “That enable us to have a strong originations. We actually got back to our 2007 levels. March was a record month in terms of originations in one month.”
The Q1 origination amount left the company's managed receivables total at $2.142 billion as of March 31 an increase from $2.031 billion as of Dec. 31 and $1.726 billion when the first quarter of last year finished.
All of the first-quarter origination activity coupled with its rising portfolio helped CPS to generate earnings of $7.2 million, or $0.24 per diluted share. The figures were down a bit year-over-year as net income in the first quarter of 2015 came in at $8.3 million, or $0.26 per diluted share.
CPS did generate a 17.1-percent increase in revenues as the Q1 figure was $100.6 million, up by $14.7 million above the year-ago amount of $86.0 million.
Cutting into the company’s net income was a 24.1-percent jump in total operating expenses as the Q1 figures climbed from $71.2 million to $88.4 million.
Looking at the financial statement from the perspective of pretax income, CPS sustained a 17.1-percent decrease year-over-year as the metric fell from $14.7 million to $12.2 million
Despite the income declines, Bradley defended CPS’ performance during his opening remarks to investment analysts.
“We’re still quite profitable, making lots of money,” he said. “We’re making more money than we ever made before and so we’re really doing pretty well at that.
“And so as much as we’re not personally all that happy with CPS’ performance on its own, if you hold this up to the rest industry, we look surprisingly great,” Bradley went on to say.
Looking at collections
CPS reported that its annualized net charge-offs for the first quarter came in at 7.57 percent of the average owned portfolio as compared to 6.64 percent a year earlier.
The company also mentioned delinquencies greater than 30 days (including repossession inventory) stood at 8.97 percent of the total owned portfolio as of March 31 as compared to 6.86 percent when Q1 of 2015 closed.
When discussing these topics, Bradley acknowledged that “collections remain a challenge.” He insisted that both the regulatory environment finance companies navigate nowadays as well as how consumers communicate are changing significantly as they would rather trade text messages than phone calls.
“We used to call people at home and the phone on the wall would ring,” Bradley said. “Today it is the phone in their pocket and they’re not always wanting to answer that phone. So you have to come up with new ways to do things.”
A look at securitizations
After the first quarter closed, Consumer Portfolio Services announced the closing of its second term securitization of the year, a $332.7 million deal. The April transaction was CPS’ 20th senior subordinate securitization since the beginning of 2011 and the third consecutive securitization to receive a triple-A rating on the senior class of notes from two rating agencies.
Even though the transaction didn’t happen during the reporting period CPS shared, Bradley still assessed how the auto ABS market is impacting the company’s performance.
“The price and cost of funds has gone up significantly over the last few quarters. It certainly different world than a year ago in terms of what it cost to get securitization done,” Bradley said.
Having said that the cost of funds still low when we look at our historical average in terms of what it cost to get deals done,” he continued. “There’s still lots of appetite, but the people in the market mostly want to get paid a little more. And so that’s sort of an interesting new dynamic in that market that might be somewhat challenging as we go forward, so we will see.”
General Motors Financial continues to move away from a company that predominantly generates subprime paper.
During the first quarter when the company saw its net income rise to $164 million, representing a climb of 14 million, GM Financial president and chief executive officer Dan Berce highlighted how much more prime paper the company originated during the span that concluded on March 31.
“Our mix of credit continues to migrate towards prime,” Berce said in prepared remarks when GM Financial reported its Q1 results last week.
“In fact, for the March quarter of 2016, 68.3 percent of our originations were prime, that's up from 53.4 percent a year ago,” he continued. “I want to point out that the absolute level of our near and subprime lending is up year-over-year, but the proportion of our total is down respectively at 13.3 percent for near-prime and 18.4 percent for subprime.
“I want to point out that our finance receivables, which are considered subprime or with FICO scores less than 620 still comprised 57 percent of our total North America retail loan portfolio,” Berce went on to say. “So as we blend in more and more prime originations in the future, our credit metrics will improve over time. Recovery rates were down a bit year-over-year to 54 percent, up seasonally from December 2015. We do expect a modest deterioration in recovery rates as we go throughout 2016.”
GM Financial’s retail loan originations came in at $4.1 billion for Q1, which was equal to the year-ago figure but down on a sequential basis as the company generated $4.4 billion in the closing quarter of 2105.
The company’s outstanding balance of retail finance receivables stood at $30.3 billion as of March 31.
Likely the entire industry has seen, GM Financial’s lease activity gained steam in Q1. The company’s first-quarter operating lease originations totaled $6.8 billion, up from $5.4 billion in Q4 2015 and $3.0 billion Q1 2015.
The company indicated that its retail finance receivables standing at 31 to 60 days delinquent represented 3.1 percent of its portfolio at close of the first quarter, down from 3.4 percent a year earlier. GM Financial’s accounts more than 60 days delinquent came in at 1.4 percent of the portfolio; the same reading at the end of Q1 2015.
GM Financial noted its annualized net credit losses represented 1.9 percent of average retail finance receivables for the quarter, 1 basis point higher year-over-year.
The outstanding balance of commercial finance receivables stood at $9.2 billion, up from what GM Financial had to close 2015 ($8.4 billion) and last year’s first quarter ($7.6 billion).
The company reported that it had total available liquidity of $12.7 billion as of March 31 consisting of $2.9 billion of cash and cash equivalents, $8.4 billion of borrowing capacity on unpledged eligible assets, $0.4 billion of borrowing capacity on committed unsecured lines of credit and $1.0 billion of borrowing capacity on a Junior Subordinated Revolving Credit Facility from GM.
Findings from a recent Autotrader survey released on Wednesday showed 70 percent of respondents expect to receive a tax refund this year.
Perhaps better yet for dealerships and finance companies, Autotrader’s survey conducted in February that included 550 U.S. adults contained information that might goose turns and originations. Site officials highlighted that of the 27 percent of survey respondents who plan to spend their refund on a car-related expense, 61 percent are looking to purchase a new or used vehicle.
“There's nothing like a sudden influx of cash to spur on big purchases, and tax refunds make for great down payments on new and used cars,” Autotrader senior analyst Michelle Krebs said. “However, it’s important for car shoppers to be smart about the purchase, being sure to get the right car for their needs that fits nicely into their budgets.”
If a shopper comes to your store’s website or showroom not ready to sign a contract for the most expensive vehicle in inventory, Autotrader’s editors recommended what they think are the 10 best used cars now available and easy to find for a retail price of $13,000 or less:
2012-2015 Chevrolet Sonic
2007-2012 Mazda CX-9
2010-2012 Ford Fusion
2003-2008 Nissan 350Z
2005-2010 Honda Odyssey
2005-2012 Nissan Frontier
2006-2011 Hyundai Azera
2010-2015 Subaru Outback
2010-2014 Kia Soul
2006-2012 Toyota RAV4
A wide array of technology providers in the auto finance space — including EFG Companies, F&I Express, RouteOne, National Credit Center and eLEND Solutions — all recently either formed new partnerships or rolled out enhancements to their solutions aimed at helping dealerships and finance companies.
The latest development spotted by SubPrime Auto Finance News was the enhanced partnership forged by EFG Companies and F&I Express. The organization created the partnership to better serve their dealership clients by fully integrating their eContracting capabilities.
“At EFG Companies, we understand that no two dealers are the same,” said John Pappanastos, president and chief executive officer of EFG Companies.
“Each dealer operates with different goals, success metrics, and systems, and we pride ourselves in acting as a strategic partner in their success,” Pappanastos continued. “In our effort to further that initiative, we partnered with F&I Express to augment our growing list of e-contracting solutions with one of the most utilized eContracting platforms in the market.”
F&I Express president and CEO Brian Reed added, “For almost 40 years, EFG Companies has been leading innovation within the automotive industry. We have been eagerly anticipating their addition to our F&I eContracting network and look forward to bringing their products to our dealer customers.”
RouteOne launches new desking product
RouteOne recently launched what the company dubbed RouteOne Desking; a new product that can enable dealers to quickly calculate and present monthly payment options to their customers.
The company highlighted that RouteOne Desking covers multiple sales types, including lease, retail and cash deals.
RouteOne Desking features rates, incentives, and residual values from captives and a wide array of finance sources. It also can check for rebate and program compatibility to help reduce errors and the need for manual verifications. It includes dealer configurable options, such as taxes and fees, and default aftermarket values to allow for room on the back-end when the deal moves into F&I.
Once a deal has been desked, all the data from it can generate a credit application, in RouteOne, with the simple click of a button.
“RouteOne’s Desking tool is excellent. The integration is great, however what sets it apart for me is the look and functionality of the customer proposals,” said Jesse Akins, sales manager at Pace Chevrolet in Reidsville, N.C.
RouteOne chief executive officer Mike Jurecki acknowledged, “There are many outstanding desking solutions in the marketplace today, which we will continue to integrate with to fully support dealer choice. So we didn’t get into the business just to get into it.
“We got into desking because our customers asked us to,” Jurecki continued. “They wanted an easy way to consistently calculate payment across all channels that integrates directly into the RouteOne workflow that they are so comfortable with and count on for its reliability. With the launch of this new product, they are able to do just that.”
For more information, dealers can visit www.routeone.com/desking or call (866) 768-8301.
National Credit Center unveils Avendas CRM
National Credit Center (NCC), a provider of comprehensive credit reporting solutions, data and marketing solutions recently rolled out its new customer relationship management technology product — Avendas CRM.
Designed to work with NCC's dealer clients to enhance their customer's experience, Avendas CRM is designed so dealers spend less time using software to locate requisite data, and more time communicating effectively with their customers.
Built on what NCC contends is a responsive, cloud-based platform, Avendas CRM can allows for full functionality and the best experience on any device.
“For two decades, National Credit Center has been on the forefront of innovation in the automotive sector, and that tradition continues with the introduction of Avendas CRM," said Jevin Sackett, chief executive officer of NCC parent company Sackett National Holdings (SNH).
“In developing Avendas CRM, we’ve invested more than 20,000 hours in coding alone, with countless additional hours dedicated to ideation, workflow, and UI/UX. Our automotive professionals spent thousands of hours conducting A/B testing with dealers and industry experts, then used their suggestions and feedback to enhance the product,” Sackett continued.
“The resulting system reflects the wealth of resources we've used to develop this innovative CRM,” Sackett went on to say. “Avendas CRM was designed to minimize the time required to deliver the right message, to the right customer, at the right time."
Understanding the critical importance that time management plays in the automotive industry, Avendas CRM is designed so that dealership staff can be fully trained in a few days, through either in-store training or via online, instructor-led classes. One of the goals of Avendas CRM was to free up dealer staff to interact more with customers, instead of spending time using software to find the necessary data and information required to communicate effectively with customers.
“Avendas CRM was developed to keep pace with the modern methods dealers use to manage their customers' experience,” said Shawn Morse, NCC’s senior vice-president of software solutions. “Currently, the most widely used CRM platforms in the automotive sector were built before the iPhone and Facebook were even released.
“As a result, in our consultations with dealers during Avendas’ development, we heard that many CRM systems weren't optimized for today’s technology, and that resulted in deficiencies in a host of areas — including reporting, email deliverability, security and the ease of use of their existing CRMs,” Morse continued.
“Avendas CRM was developed specifically to address the concerns that dealers identified with their existing CRM systems. As a result, Avendas is designed to provide a cost-effective, modern, intuitive CRM system that gives complete control of actionable data, process management, marketing, security, and reporting back to our dealer clients,” Morse added.
With more than 5,000 dealership partners nationwide, NCC said it was critical that Avendas CRM complement the company’s existing products. As a result, Avendas CRM also was designed to work seamlessly with the NCC credit portal (NCCI), giving dealers powerful customer data in the most efficient way possible.
“With its ease of use, flexibility, customizability and value, Avendas CRM is breaking new ground in the field of automotive CRM,” the company said. “Designed, tested, and then enhanced by industry experts who use CRM daily, Avendas CRM will transform the way dealers manage new and existing customer relationships.”
For more information, visit www.NCCdirect.com.
eLEND Solutions’ ID Drive to generate soft-pull credit report
Executives from eLEND Solutions recently announced that their ID authentication program now instantly and automatically can convert a driver’s license scan into a consumer consented soft pull credit pre-qualification application, without even requiring a Social Security Number.
Initial results from California-based Huntington Beach Chrysler Dodge Jeep Ram show a 36-percent conversion ratio using ID Drive pre-qualification and a dramatically shortened sales cycle.
“In the first month, we scanned nearly 900 driver’s licenses — capturing the relevant data in our in-store systems, giving us an accurate record of who has driven our vehicles — of those scanned, nearly 50 percent opted for pre-qualification and we converted 36 percent of those into a sale — making it one of our highest performing and most profitable channels,” said Pete Shaver, managing partner of Huntington Beach Jeep.
“And because the process is so fast and easy, we can verify their address and pull credit in less than 10 seconds. We are saving a huge amount of manpower and time,” Shaver added.
Having this information up front enabled Huntington Beach Chrysler Dodge Jeep Ram to shave an estimated one to two hours off the sales process — what eLEND Soluations called a huge upside for both the dealership and the customer.
Shaver also confirmed that the simplified pre-qualification process directly impacts customer satisfaction.
“Customers appreciate not having to share their SSN and knowing there won’t be any negative impact on their credit score — and they love the fact that it shortens the sales cycle,” Shaver said.
Pete MacInnis, chief executive officer of eLEND Solutions explained that ID Drive’s pre-qualification differs from pre-screening or hard pull inquiries because it does not require a SSN or impact the consumer’s credit profile while providing the dealer with a full credit report and real-time credit score.
“This new enhancement is designed to help dealers sell more cars in less time, improve CSI by reducing bottle necks in the F&I department and improve overall profitability,” MacInnis said. “We are giving dealers the information they need to put customers in the right vehicles with the right deal structures, matched to specific lender programs at the front of the sales process.”
In addition, MacInnis pointed out that ID Drive is the only driver license scanner that can authenticate every version of driver license for all 50 states, appending validated address and phone information, and automatically can convert a driver license scan into a consumer consented pre-qualification application.
Once scanned, the consumer’s lead information is electronically integrated with any pre-existing lead or credit application data — prior to the test drive — then securely exported into the dealer’s CRM and finance systems, integrating the historically fragmented sales and finance processes.
The company added that ID Drive’s Pre-qualification also includes much lower costs per credit pull and simplified compliance requirements and cost savings for dealers.
ID Drive’s pre-qualification function can work hand-in-hand with eLEND’s CreditPlus program which instantly pre-qualifies customers based on dealer-defined credit criteria, giving car buyers direct, upfront access to dealership financing sources and real near-final terms from multiple finance companies, all of which are controlled by the dealer.
For more information, visit www.elendsolutions.com.
Organizers from the American Financial Services Association indicated this week’s Vehicle Finance Conference “was once again a huge success.”
More than 600 attendees and exhibitors gathered at Caesar's Palace in Las Vegas for three days of presentations, panel discussions and networking during AFSA’s 20th edition of the event aimed at allowing finance company executives the chance to interact with each other as well as service providers and other special guests.
According to association’s recap of the conference shared through its weekly Newsbriefs, the series of events started on Tuesday with AFSA president and chief executive officer Chris Stinebert sitting down with a panel of economists and industry leaders to talk about the state of the auto finance space.
Apple co-Founder Steve Wozniak surprised conference attendees when he arrived in Las Vegas to introduce Kevin Mitnick, who some consider to be the world’s greatest hacker.
A cautionary tale on cyber security came from Mitnick, who warned attendees that they and their companies are at risk from hackers every day. Mitnick now helps a variety of businesses and individuals ensure that they don’t fall prey to the association described as “digital mayhem.”
AFSA added, “Mitnick’s presentation and demonstration talked about technology, but also importantly, talked about the social aspect of hacking, or how hackers use non-technological means to steal the information they need from employees and other targets.”
To start off the second day, Stinebert shared updates about future AFSA initiatives. Ginger Herring, who is the AFSA Education Foundation chair and president of 1st Franklin Corp., also took the stage and reviewed important developments that the AFSAEF is undertaking.
AFSAPAC chair Martin Less, who is president and CEO of Nationwide Acceptance, informed attendees about the “great” work the PAC is doing in Washington, D.C.
Later on Wednesday morning, AFSA highlighted that keynote speaker Frank Luntz dazzled attendees with an entertaining and insightful presentation packed with statistics and best practices for word usage. Luntz highlighted critical differences between male and female audiences and the best words or phrases to use with each gender.
Luntz also gave attendees with actionable communication examples that they can implement immediately.
“If I could leave you with once phrase, it would be to ensure you tell consumers that you want to provide them options, but Washington and regulators are keeping you from providing them,” Luntz said.
The conference’s general sessions on Wednesday afternoon got underway with a look into the vehicle-sharing market and an enlightening talk on hiring and retaining millennials.
“Auto finance will be the gateway for millennials to get involved in financial services,” said Jason Dorsey, who is chief strategy officer and millennials researcher at The Center for Generational Kinetics.
Concurrent education sessions highlighted a number of issues, including profitability, compliance relationships with dealers and FIS’ Vendor Risk Management system.
When it comes to the future of payments, finance companies should “focus on satisfying consumers,” according to Michael Rogers, who is director of business development at ACI Worldwide.
AFSA wrapped up the conference on Thursday morning with AFSA Vehicle Finance Division Chair and chief operating officer of Ford Motor Credit Joy Falotico conducting a frank discussion with Jeffrey Carlson, 2016 National Automobile Dealers Association chairman and president of Glenwood Springs Ford in Colorado. The pair touched on common issues facing both dealers and finance companies.
AFSA’s CEO panel was once again moderated by Charlie Vogelheim, the host of Motor Trend Auto and a part of the executive team at TPC Management Co. The CEO panel included:
—Dawn Martin Harp, head of dealer services at Wells Fargo Dealer Services
—David Paul, senior vice president of financial services at American Honda Finance
—Ian Anderson, group president at Westlake Financial Holdings
—John Hyatt, executive vice president, dealer services at U.S. Bank
The collection of executives “shared best practices and highlighted some of the opportunities on the horizon for business leaders,” AFSA said.
It’s been a busy week of announcements by Equifax; first a solution launch with LexisNexis Risk Solutions tailored specifically for the auto finance space. Then on Friday, Equifax joined with online sales lead generator Black Book Activator to develop Black Book Activator eCredit, a new customer-facing credit scoring solution available to the dealer community and online vehicle shoppers.
Executives explained the Black Book Activator eCredit solution can provide vehicle shoppers on dealer websites with free access to their Equifax Risk Score; what’s considered to be a key measurement designed to educate consumers to help better understand their vehicle finance options and monthly payments based on their credit score.
The companies insisted the solution can provide a simple process that can deliver the user’s Equifax score instantly and privately. The credit scores are not shared with any third parties, including the dealer.
Equifax and Black Book highlighted the ease of use of this service speaks to consumers growing concerns around identify theft and fraud that can occur as a result of sharing sensitive personal information.
Unlike many other services, which require a consumer’s Social Security number, date of birth and/or other sensitive personal information, the service asks only for a user’s name, address and answers to a two-question, multiple-choice quiz. The process is designed to ask user-specific questions, which is geared to help ensure that the right score is delivered to the correct person.
And because the score is requested by the consumer, it does not adversely affect future credit scores, according to Mike McFall, president of Black Book Activator Division.
“Our testing and consumer feedback have shown that car shoppers want access to their credit scores as they are making buying decisions, but until now, there hasn’t been a simple, non-intrusive way for auto shoppers to get an instant, accurate score without sharing a lot of detailed information,” McFall said.
“Working closely with Equifax, we've created an easy plug-in for dealers, and a truly risk-free way for consumers to gain insight about which vehicles might make the most sense for their budgets, moving them one step closer to purchase,” he continued.
Before mentioning dealers who are already seeing benefits, Equifax vice president of dealer services John Giamalvo pointed out the value proposition for stores this solution can present.
“Both Black Book Activator and Equifax are focused on innovation and customer service,” Giamalvo said. “Black Book Activator eCredit is a unique solution that will engage online customers and help enable smoother, better informed transactions for both buyer and seller.”
Frances Looper, who is the Internet manager for Love Chevrolet in Columbia, S.C., was among the first to test the new service.
“We are always excited to try things that make it easier for our customers to shop online,” Looper said. “We focus heavily on digital and this fits right into our plan because most people are hesitant to give their Social Security number for anything they do online, but they want a score to be smarter shoppers. This gives them both.
“As a bonus, users don't leave our site to get the information, and they don't feel as if their privacy has been compromised. It makes everything friendlier," she added.
Frank Vargas, Internet manager at Planet Dodge in Miami acknowledged that customers are savvier today as they have “high expectations and dealers who step up with information like credit scores are more likely to engage them and make a sale.”
In light of the belief that everyone is pressed for time, Equifax and Black Book shared one more dealer’s experiences with the tool that aimed at making the process of qualifying customers much easier and quicker.
“These clients were invisible shoppers before this,” said Patrick Silva, who is marketing and operations manager of Mel Rapton Honda in Sacramento, Calif. “We weren’t seeing enough leads before and this has helped to bring in more.”
Black Book Activator eCredit will be showcased this weekend throughout the NADA Convention & Expo in Las Vegas at booth No. 1661C.
ChannelNet analyzed the usage of its technology by 10 different auto finance companies to determine the six components comprising what the company describes as a best-in-class digital experience.
ChannelNet spent a year combining through the performance of these finance companies that use its omnichannel solution that combines data, content and asset management, personalization, a rules engine and analytics into one platform that clients can use across the life cycle to acquire, cross-sell and retain customers.
The ChannelNet 2016 Auto Finance Digital Experience Benchmark Study leveraged comparisons against Silverpop’s 2015 Email Marketing Metrics Benchmark Study to provide comparable data and categories. Silverpop’s survey examined messages sent by nearly 750 companies and 3,000 brands in 2014, and ChannelNet utilized Silverpop’s industry averages and top quartile percentages in the automotive and financial services verticals as our benchmarks.
What ChannelNet found was all 10 of its auto finance clients exceeded industry benchmarks for unique open rates, click-through-rates and click-to-open rates. ChannelNet reviewed the data for 4 million email-marketing messages sent by these 10 undisclosed auto finance companies from February of last year through February of this year.
So why did those 10 auto finance companies enjoy so much success? The ChannelNet 2016 Auto Finance Digital Experience Benchmark Study pinpointed six reasons.
1. A customer-centric focus instead of a product-focused sales process increases engagement.
Across all 10 operations, ChannelNet noticed the one common factor that boosted every finance company’s click-to-open performance to the top quartile and beyond is the two-step marketing combination of an email or text message partnered with a personal microsite.
The study showed finance companies achieving the highest click-to-open rates and the longest dwell times on the site (average visit is 4 minutes, 37 seconds) are serving customers with personally relevant content about their vehicle, finances and dealer.
“They also provide educational information that relates to a customer’s final step in the vehicle lease journey,” the study said. “Their goal is to remove as much friction as possible from the lease-end process so customer has a great turn-in experience.”
2. One of the keys to increasing customer engagement is coordinating the timing of the messages across the customer life cycle — consideration, purchase, use and retention.
ChannelNet noticed the better job a finance company does with coordinating the message timing and content with the stage of the customer’s vehicle ownership, the better the open rates.
The study determined some finance companies are realizing tremendous open rates of 60 percent or higher — 50 percent higher than the top quartile in the industry benchmark groups.
3. Companies that understand that no one organization or part of the sales channel owns the customer relationship score the highest.
The study mentioned these finance companies provide customers with access to vehicle, dealer, finance and consumer education information all in one place.
4. Emails can be customized by dealer, vehicle, contract duration, location, website behavior, status and many other factors.
ChannelNet learned that sending an email with content specifically selected to meet the needs of the individual results in 29 percent higher unique open rates and 41 percent higher unique click rates.
“The more relevant a message is, the more likely it will be opened,” the study indicated. “Repeatedly sending the same content, even if it is personalized, greatly reduces the open rates.”
5. Responsive design increases clicks-to-open.
The data showed that mobile visits for auto lenders without a mobile optimized responsive design stagnates at about 30 percent.
In contrast, ChannelNet pointed out best-in-class finance companies are logging click-to-open rates of up to 55 percent.
“The data reveals that if a lender does not offer a responsive design, a high percentage of mobile users who click on a link do not read the content,” the study said in which ChannelNet mentioned 46 percent of mobile users immediately leave the website at the login screen compared to 16 percent of desktop users.
6. Finance companies that require customers to log-in to access all content reduce their click-to-open rates.
When access to content that is not personal and private is behind a firewall, ChannelNet noticed the unnecessary login requirement diminishes engagement.
“Best-in-class lenders understand that not all data needs protection,” the study said. “With one click, a customer can see relevant information such as his or her vehicle lease miles, contract end-date or educational information on how to reduce lease-end turn-in fees.”
ChannelNet chief executive officer and founder Paula Tompkins elaborated how finance companies are achieving superior customer engagement metrics,
“For automotive finance companies the delivery channels are pretty common — emails, direct mail and self-service websites,” Tompkins said. “What sets our solutions apart in the marketplace is the combination of data, analytics, content, business rules and personalization.
“This unique combination provides our brands’ customers with relevant content wrapped in a personal appeal delivered at the right moment in time. Our industry-leading approach delivers a huge competitive edge,” she went on to say.
Charts and more data from the ChannelNet 2016 Auto Finance Digital Experience Benchmark Study can be downloaded here.
Enterprise Car Sales is now a preferred used-vehicle provider for Navy Federal Credit Union. As part of the agreement, Enterprise Car Sales and Navy Federal said they will periodically team up to offer promotions catered to Navy Federal members.
In addition, members have the flexibility to browse Enterprise’s inventory, compare vehicles and find special offers directly from their desktop or mobile device through Navy Federal’s website.
The company highlighted Enterprise’s commitment to the military goes back nearly six decades, after Enterprise’s founder, Jack Taylor named his business after the USS Enterprise, one of the aircraft carriers he served on as a U.S. Navy pilot during World War II.
Today, Enterprise’s support of the military focuses on three key areas — recruitment and hiring, local operations and community relations. In fact, military veterans and reservists comprise nearly 13 percent of Enterprise’s total U.S. workforce.
“This partnership is a natural fit for Enterprise and we are excited to be able to serve Navy Federal members with exceptional car-buying experiences and enhance their member loyalty,” said Beth Wheeler, corporate director of business development for Enterprise Car Sales.
In an effort to continue to advance the adoption of digital technologies among automotive finance companies and dealers, Dealertrack recently announced that Ally Financial is now broadly available for eContracting through the Dealertrack platform.
Dealers in 42 states currently have access to Ally for eContracting via Dealertrack, and officials indicated the remaining eight states are expected to have accessibility over the next several weeks.
Ally president of automotive finance Tim Russi said, “eContracting is gaining momentum and popularity — and will be a vital part of the car buying process in the years to come because of its convenience and efficiency.
“The broad availability of eContracting on the Dealertrack F&I platform gives more dealers the opportunity to evolve their contract process and receive faster funding with Ally, thus giving car buyers a better customer experience,” Russi continued.
From generating contracts for execution to the electronic verification, signature, submission and storage of contracts, Dealertrack can deliver an end-to-end eContracting solution for dealers and finance companies. Since introducing its eContracting solution several years ago, Dealertrack has booked more than 3 million eContracts. Mobile options are also available, and contract review and signing can be performed on either an iPad or Android tablet.
“Digital technology is transforming the way dealers and car buyers interact, including the finalization of deals and contracts,” said Mark Furcolo, senior vice president of lender solutions at Dealertrack.
Furcolo continued, “eContracting is a key part of Dealertrack’s Dealflow Advantage, uniting online and in-store processes and linking the customer journey to facilitate a transparent, efficient process for car buyers, dealers and automotive finance providers, such as Ally.”
The concept of starting an in-house auto finance company in 2016 could be viewed as a curious one.
There's the current auto lending regulatory landscape, plus the echoes of the late 2000s auto finance hurdles.
But consider, for a moment, the potential in the peer-to-peer car sales space.
Depending on how you measure it, says Toby Russell of Shift Technologies, there is typically anywhere from $75 billion to $150 billion in peer-to-peer transactions on an annual basis.
But finance isn’t a huge part of that, said Russell, who is Shift’s head of business and product. That’s where Shift hopes to make a difference.
Shift is an online, peer-to-peer car marketplace, one of several similar players to have emerged in this space in recent years. Last week, it launched an in-house auto lending business known as Shift Finance that is offering direct-to-consumer loans.
Customers of Shift will be able to get loans directly from Shift Finance, which is starting out as a pilot program in Virginia with plans to expand throughout all of the Shift’s territory.
“While something like 80 to 90 percent of traditional used-car dealer sales are financed, it’s exactly the opposite for peer-to-peer,” Russell said in a phone interview with Auto Remarketing, SubPrime Auto Finance News' sister publication. “(Approximately) only 10 percent of peer-to-peer sales end up being financed.
“And so what we’re looking to do is add to the Shift platform, really, the ability to facilitate direct financing for the vehicles, so that we change that equation and make it look more like 90 percent of peer-to-peer sales are financed, much as the way they are in the traditional retail model, versus the 10 percent today,” Russell said.
Part of the challenge in peer-to-peer car transactions — particularly for buyers — has been the lack of being able to know for sure you’re getting a fair price and a quality vehicle, Russell said.
“Knowledge about the quality of the vehicle has been a traditional barrier,” Russell said. “And as an extension of that … the ability to finance a vehicle has been a major barrier.”
And that, again, is the issue Shift is trying to solve. Russell said the biggest buyer feature request Shift gets is consumers asking if financing is available.
The reason that request comes up is fairly simple, Russell said: when you buy a car, it’s more akin to purchasing a house than your everyday purchase. Most folks aren’t carrying around $17,000 to $25,000 in cash — and they tend to think of the car purchase in terms of having a monthly payment.
Challenges
Shift Finance, Russell said, runs on a captive vertical financing model. Asked about the legal/regulatory hurdles of setting up a captive finance company, Russell said there are a few legal structures to choose from, but he emphasized that “in a lot of ways, the legal barriers aren’t the hardest part; it’s actually a structural data barrier.”
“Lots of people have tried to do direct-to-consumer peer-to-peer auto finance in the past,” he said, “and the biggest problem that folks will oftentimes cite is, ‘Yeah, we tried that; the problem was, there was tons of fraud.’”
In a nutshell, what opens the door to fraud in this model is challenges surrounding verification, both of asset and buyer — even their very existence.
One way to think of it: Buyer tells the lender he wants to buy a car from the seller — both are private individuals.
Buyer gets a $20,000 loan.
But as it turns out, buyer and seller are actually friends, and there is no vehicle. The two just conspired to commit fraud.
“The inability to verify the existence and the quality of both the vehicle and the individual — the buyer — has historically been a huge structural barrier to pure online, direct-to-consumer auto finance plays,” Russell said.
Shift Finance aims to combat that in two ways. Russell said that “because we take and inspect the vehicle in a peer-to-peer transaction, we’re able to, one, verify that it’s real (and) two, verify the quality of the vehicle, in part, as saying, ‘yeah, we think this thing is of good enough quality to be sold through the Shift platform.’
“Second, we actually interact in person with the buyer. Because we do an on-demand direct-to-consumer test drive — which nobody else does — we’re able to say, ‘Yeah this is a real person.’ We’re able to see their address and interact with them and actually hand them an iPad to fill out the credit information that they need to,” Russell said.
“That combination of in-person interaction/direct-to-consumer interaction — but also direct-with-vehicle assessment — allows us to gather the data that’s needed to be able to do the underwriting. But we’re doing it in the peer-to-peer space, which no one else has ever done,” he said. “And that means there’s an even bigger ‘goodness,’ and that is, because we’re both facilitating the transaction and taking the risk, we’re incentivized to help the buyer get a fair price, i.e. as low a price as is reasonable, and underwrite that, take the risk on the car.”
Russell said getting a lower price means the company is underwriting a car that has a lower loan-to-value, which drives better risk management. Thus, this leads to better pricing on the financing and provide better offers for the consumer and Shift as the party taking on the risk, he said.
“In the past, that hasn’t been possible, because no one who’s able to facilitate a car transaction has also had the scale to do financing, with the possible exception of maybe CarMax — albeit they’re in sort of the traditional dealer model, where they actually own the car and they’re selling it,” he added.
Credit tiers, term lengths
As far as credit tiers, Shift Finance will start offering in the near-prime tier, with plans to expand. The company chose to start with near-prime because there’s a strong need among shoppers in that tier for financing in the peer-to-peer space, Russell. Plus, he said “it’s still predictable” in terms of payment performance.
Shift Finance hopes to build out its credit model to be able to offer loans further down the credit spectrum.
As for term lengths, the company will offer 48- to 72-month loans, depending to some degree on the age of vehicle. Shift Finance is also aiming to set LTV between 90 percent and 100 percent.
Regulatory landscape
The regulatory environment in auto finance certainly can be a challenging one.
To aid in preparing for such a landscape, Russell said Shift has hired people with auto finance backgrounds who have risk management and regulatory experience. Russell himself worked at Capital One for five years
“I personally believe that what regulators want is to optimize for good, fairness for consumers and stability in the banking system. And so, what they don’t want is folks going out and taking advantage of consumers. And they don’t want folks going out and creating risky structures that could have a negative impact on our financial system,” Russell said.
“And so at its core, our deepest approach to having a good regulatory infrastructure with which to do well is the underlying philosophy of we want to get people low loan-to-value ratio loans, good rates on reasonably low-priced vehicles relative to what they could find elsewhere in the marketplace, thereby doing two things: setting them up for success — and not getting crazy interest rates or crazy loan-to-value, stuff that’s going to lead to them being overstretched or defaulting — and then secondly, it puts the lending in a good risk-management position. And those things go hand-in-hand,” he added.
Essentially, it’s about creating a structure that promotes a healthy outcome for the borrower and financial system, which he says is what regulators want.
But, what if customer defaults?
Russell answered this with a bit of background first.
Shift will own the loan and will have raised debt to be able to offer the financing. At some point, they will likely “securitize that out,” similar to what CarMax has done, he said.
But here’s what Shift is exploring:
The model Shift aims for is to price cars lower than what one might find in the retail market. So, a consumer finds a car via Shift and is paying, say, 10 percent down, Russell said. He or she will have equity from the get-go.
Should the borrower default, Shift’s goal would then be for that person to sell the car peer-to-peer, make back the money to pay is owned on the loan, then get a lower-priced and different car that he or she could afford.
“Our goal is for folks not to default, but instead to be able to have enough equity in their vehicle where they’re able to re-sell, pay off their loan and then buy a different car at a lower price,” he said. “Now, that’s a lot easier in a world where you’re not borrowing against a car with a loan-to-value of 130 percent, where you’re basically borrowing more than your car is worth on the retail market.”
