The National Automotive Finance Association and the American Financial Services Association on Thursday announced the availability and launch of the 2016 Non-Prime Automotive Finance Survey.
For 20 years the NAF Association has produced a report of the nonprime auto financing market. NAF Association leaders partnered with AFSA for the second year to conduct the broadest survey of the non-prime auto-financing marketplace. Through the combined efforts of both associations, 50 companies contributed to the survey to produce the most comprehensive study of the industry ever compiled.
“More and more companies are relying on the survey as a benchmarking tool to measure their company’s performance and to identify industry trends,” NAF Association executive director Jack Tracey said. “The metrics can also be useful in explaining a company’s policy decisions to regulators.
“This broad base of contributing finance company data provides an accurate and unbiased view of the industry,” continued Tracey, who again will be part of the SubPrime Forum during Used Car Week on Nov. 14-16 at the Red Rock Resort and Casino in Las Vegas.
The increased participation in the 2016 Non-Prime Survey represents an outstanding principal exceeding $34 billion (year end 2015).
Below is an example of the key market trends, performance evaluations, statistical analysis, comparison and benchmarking included in survey:
• Market growth
• Competition
• Market share
• Dealerships network
• Risk indicators
• Credit scores
• Payment to income ratios
• Average loan rates
• Delinquency
• Repossession rate
• Net charge-off rate
• Average amount financed
• Contract terms
• Operating expenses
• Profitability
The survey is being distributed at no cost to NAF Association and AFSA member companies that participated. For other companies interested in the survey, the cost is $500 and it can be ordered online here.
While delinquencies posted a “slight increase” during the second quarter, Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion, pinpointed the two drivers that brought more than 5 million additional consumers into the auto finance market in Q2.
According to TransUnion’s latest Industry Insights Report released on Tuesday, the number of consumers with an auto loan increased 7 percent from 72.87 million in Q2 2015 to 77.95 million in Q2 2016. During a phone conversation with SubPrime Auto Finance News, Laky pointed out what is bringing those new accounts into portfolios.
“One is we still have strong economic fundamentals,” Laky said. “Consumers are continuing to get new jobs and so the employment rolls are growing. People are getting raises so their wages and salaries are increasing year-over-year. People have the confidence to get a new car. If they haven’t worked for a while, and you just got yourself a new job, a lot of people take that occasion to get themselves newer transportation.
“The second thing is we’re still in a very good rate environment,” he continued. “Lenders are offering strong rates and even some really good lease deals. Many consumers are also choosing to finance their new-car purchase or lease their new-car purchase just because it’s a very low cost of funds to do so. People who might otherwise pay cash are choosing to finance.
In Q2, TransUnion indicated the average auto loan balance per consumer grew 2.7 percent and reached $18,177, the highest level post-recession. The average balance was up from $17,699 in Q2 of last year.
“Competition is still strong,” Laky said. “Over the past five years, as we’ve come out of the recession, there has been a return of credit unions. We’ve seen credit unions get big again in auto lending, particularly on the prime side.
“On the non-prime side, we’ve seen again some growth in confidence among the independent lenders, the ones who focus on non-prime and subprime consumers,” he continued. “When subvented financing and good lease programs are in place, captive finance companies are in play, as well.
“It’s a good market where the rising tide is lifting boats for everyone,” Laky added.
Viewed one quarter in arrears to ensure all accounts are reported and included in the data, TransUnion determined auto loan originations grew 6.4 percent year-over-year in the first quarter of 2016. Auto originations reached their highest post-recession level at 6.93 million in Q1 2016, up from 6.51 million in Q1 2015.
With so much paper in portfolios nowadays, TransUnion turned its attention to the auto delinquency rate connected to contracts 60 or more days past due.
Analysts found that in Q2 of this year the auto delinquency rate increased to 1.11 percent, an 11-basis point rise from 1.00 percent in Q2 of last year.
“While delinquency rates rose in the second quarter, auto delinquency has been at all-time lows. We do not see a cause for concern from this slight increase,” Laky said.
“It still remains a good loan to make as you’ve seen in the delinquency side,” he continued about auto financing. “That means as more lenders are competing for every loan, the buy rates face a lot of pressure.
“What lenders are doing — the ones I think are successful in the marketplace at achieving continued growth in a high-competition environment — they’re looking for new ways to segment risk using alternative data or trended data that TransUnion has and others to better understand the risk of that particular consumer so they can carve out places where they believe that the consumer — be them subprime or prime — is going to perform better than a standard scoring model applicant,” Laky went on to say.
“When lenders can find those consumers, they can confidently compete for those loans and know they’re going to be profitable,” he added.
For more details about other segments of the credit market, TransUnion’s Q2 2016 Industry Insights Report can be reviewed here.
With technology leveling the playing field to a degree, relationships nowadays really matter, especially when they involve how a dealer is going to get a delivery bought for their customers or how they’re going to have the floor planning for inventory.
The J.D. Power 2016 U.S. Dealer Financing Satisfaction Study determined the relationships auto finance providers develop with dealerships are critical to dealer satisfaction and to remaining competitive in the market, especially as the new-vehicle sales market tightens.
J.D. Power insisted a combination of “slowing” new-vehicle sales and an “uncertain” used-vehicle market is contributing to an already contested auto-lending environment. Analysts acknowledged technology has eliminated disparity of speed in financing, leaving finance companies to differentiate themselves by the relationship they are able to form with the dealership.
“Speed has been king and the area lenders have traditionally focused on, but as the market gets tougher, lenders need to center their attention on their relationships with dealers, or they are going to lose business," said Jim Houston, senior director of the automotive finance practice at J.D. Power.
“Lenders need to move beyond a transactional relationship with dealers to a richer consultative partnership,” Houston continued. “Lenders with a dealer-centric culture across their organization — not just in various pockets of the business — are the ones that are most likely to excel.”
Houston noted that in building a dealer-centric culture, finance companies must understand their dealers’ businesses and goals, which helps establish them in the eyes of dealers as their business partner and problem solver. That starts with communication with the dealer.
The study indicated that fewer than half of dealers receive consistent sales rep calls or visits, both of which can boost overall satisfaction by as much as 68 points and 75 points, respectively, on a 1,000-point scale. But it's more than just the frequency of the contact, it's the nature of those touch points that adds value to the relationship.
"Dealers value a lender that can help them handle the tough issues and solve those 'outside-the-box' situations,” Houston said. “This is where having the right people focused on their dealers and helping them execute their strategic plan is essential."
Opportunities to excel and grow business
The study identified three areas of opportunity for finance companies that will help them enhance their dealer relationships. They included:
1. Consistent performance among their dealer relationship managers
2. Identification of their best dealers and a prioritization of those relationships
3. Efforts that focus on areas most important to dealers
“These are the things dealers say they want from their lenders, but are not necessarily getting on a consistent basis,” Houston said. “When the market gets tough, lenders that meet dealer expectations are going to get a greater share of the business.”
Findings of the study showed that high satisfaction with finance companies leads dealers to increase the amount of business they send to those respective lenders over the next year. Falloff is swift when satisfaction declines.
When satisfaction scores are 900 points or higher, J.D. Power found 62 percent of dealers say they are likely to increase the amount of business they send to the lender over the next year.
When satisfaction falls to between 800 and 889, J.D. Power noticed only 37 percent of dealers indicate they intend to send more business to that finance company.
When satisfaction dips to 700-799, J.D. Power said only 22 percent of dealers intend to increase business with that finance company.
Analysts mentioned two other key findings from the study, which included:
—Speed still matters: Speed still plays a significant role when dealers are choosing lending partners.
When finance companies fund error-free contracts on the same day as they are submitted, dealer satisfaction increases by as much as 64 points.
When finance companies notify dealers of contract issues or errors within four hours after they are submitted, satisfaction increases by as much as 60 points.
—Exceptions to the rule: Dealers want their lending partners to value the total relationship. In some cases, this means providing exceptions when warranted.
A well-managed exception process can increase overall satisfaction by up to 79 points.
Dealer financing satisfaction rankings
German luxury brand captives dominated the dealer rankings.
Mercedes-Benz Financial Services ranked highest among lenders in the prime retail credit segment for a second consecutive year with a score of 961. Following in the rankings were BMW Financial Services (959), Alphera Financial Services (941), Lincoln Automotive Financial Services (936) and Infiniti Financial Services (930).
Mercedes-Benz Financial Services also ranked highest among finance companies in the retail leasing segment for a second consecutive year with a score of 982. Following in the rankings were BMW Financial Services (958), Ford Credit (913), Volvo Car Financial Services (912) and Subaru Motors Finance (911).
And making it a sweep for the captive, Mercedes-Benz Financial Services ranked highest among floor planning providers for a sixth consecutive year with a score of 986. Following in the rankings were BMW Financial Services (975), Huntington National Bank (969), Hyundai Motor Finance (945) and Kia Motors Finance (945).
J.D. Power explained satisfaction is measured across three factors in the prime and non-prime retail credit segments: finance provider offerings, application and approval process, and sales representative relationship.
Four factors are measured in the retail leasing segment: finance provider offerings, application and approval process, sales representative relationship and vehicle return process.
Four factors are measured in the floor planning segment: finance provider credit line, floor plan support, sales representative relationship, and floor plan portfolio management.
The 2016 U.S. Dealer Financing Satisfaction Study captures more than 20,000 finance provider evaluations across the four segments. These evaluations were provided by 3,100 new-vehicle dealerships in the United States. More details can be found here.
Prime retail credit overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 961
BMW Financial Services: 959
Alphera Financial Services: 941
Lincoln Automotive Financial Services: 936
Infiniti Financial Services: 930
Subaru Motors Finance: 908
Jaguar Financial Group: 902
Chase Automotive Finance: 895
Land Rover Financial Group: 891
Huntington National Bank: 890
Volvo Car Financial Services: 890
Ford Credit: 888
NMAC: 884
BB&T: 881
Citizens One: 875
TD Auto Finance: 874
Ally Financial: 873
Mazda Capital Services: 873
Volkswagen Credit: 873
Industry Average: 868
Capital One Auto Finance: 867
Fifth Third Bank: 867
Bank of America: 866
SunTrust Bank: 864
Toyota Financial Services: 860
Kia Motors Finance: 859
Wells Fargo Dealer Services: 853
PNC Bank: 851
BMO Harris Bank: 844
US Bank: 835
Bank of The West: 822
Hyundai Motor Finance: 821
GM Financial: 815
Credit Union Direct Lending: 813
Honda Financial Services: 813
Chrysler Capital: 798
Note: Included in the study but not ranked due to small sample size are Acura Financial Services, Alaska USA Federal Credit Union, Fidelity Bank, First Niagara Bank, Gateway One Lending & Finance, MINI Financial Services, Santander Auto Finance and Security Service Federal CU.
Retail leasing overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 982
BMW Financial Services: 958
Ford Credit: 913
Volvo Car Financial Services: 912
Subaru Motors Finance: 911
Land Rover Financial Group: 891
NMAC: 891
Jaguar Financial Group: 890
Mazda Capital Services: 886
Industry Average: 885
Toyota Financial Services: 869
Kia Motors Finance: 868
Honda Financial Services: 866
US Bank: 863
Ally Financial: 851
GM Financial: 843
Hyundai Motor Finance: 835
Chrysler Capital: 828
Note: Included in the study but not ranked due to small sample size are Infiniti Financial Services, Lincoln Automotive Financial Services, MINI Financial Services and Volkswagen Credit.
Floor planning overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 986
BMW Financial Services: 975
Huntington National Bank: 969
Hyundai Motor Finance: 945
Kia Motors Finance: 945
Ford Credit: 944
Chase Automotive Finance: 941
Industry Average: 938
Ally Financial: 935
NMAC: 931
Bank of America: 927
GM Financial: 926
Toyota Financial Services: 899
Chrysler Capital: 897
Note: Included in the study but not ranked due to small sample size are PNC Bank, Volkswagen Credit and Wells Fargo Dealer Services.
Equifax and Moody’s Analytics recently suggested commercial banks should consider borrowers who might fall in the non-prime or even subprime tiers to enhance their auto-finance opportunities. Evidently, officials from the Office of the Comptroller of the Currency (OCC) disagree stemming from what they shared in their Semiannual Risk Perspective released this week.
The report indicated auto finance risk is increasing because of “notable and unprecedented growth” across all types of institutions. The OCC’s concern stems from auto delinquencies beginning to increase as used-vehicle values have started to decline.
“As banks have competed for market share, some banks have responded with less stringent underwriting standards, or both, for direct and indirect auto loans,” OCC officials said in the report. “In addition to the easing of underwriting standards and potential layering of risks (higher loan-to-value ratios combined with longer terms), concentrations in auto loans have been increasing.
“These factors create the potential for increasing levels of embedded credit risk in auto loan portfolios,” they continued. “The elevated risk results in higher probable credit losses and may warrant additional provisions to the allowance for loan and lease loss or higher capital allocations.
“Supervisory work to date has noted that some banks’ risk management practices have not kept pace with the growth and increasing risk in these portfolios,” OCC officials went on to say in the report, which can be downloaded here.
During a recent webinar hosted by the Consumer Bankers Association, Equifax auto finance leader Lou Loquasto emphasized how a healthy mix is important for any part of the credit market, especially automotive.
“If our industry makes all of the loans at 800 credit, losses are going to be super low. But if they make them all at 500 credit, losses are going to be super high,” Loquasto said.
“If you look at the mix over the past five years, we have been really steady since 2011,” he continued. “What that tells us — because auto loans are short term and losses, when they come, may come sooner rather than later in the loan term — we at Equifax expect the future performance of the recent pools of business to look very similar to what happened in 2014 and 2015. That’s one of the reasons we’re very optimistic about where we’re going.”
After releasing the Semiannual Risk Perspective, Comptroller of the Currency Thomas Curry acknowledged the challenge banks have, but he still took a cautious approach.
“The banking environment continues to evolve, with growing competition among banks, nonbanks, and financial technology firms,” Curry said. “Some banks are struggling to find viable business models, while others are increasingly adopting innovative products, services and processes in response to evolving customer demands and the entrance of new competitors.
“Doing so often involves assuming unfamiliar risks, including expanded reliance on third-party relationships,” he continued. “Banks may face heightened strategic planning and governance risk if they do not use sound risk management practices that align with their overall business strategies. It’s at this stage of the cycle that we also see strong loan growth combined with easing underwriting to result in increased credit risk.
“While the OCC strongly encourages responsible innovation that provides fair access to financial services and fair treatment of consumers, we have also stressed that banks should have effective risk management to ensure such innovation aligns to their long-term business strategies,” Curry went on to say.
Commercial banks and credit unions typically work with customers in the prime space, but recent analysis shared by Equifax and Moody’s Analytics was geared to give executives and managers with those institutions some evidence in order to consider borrowers who might fall in the non-prime or even subprime tiers.
Before going into a series of charts and graphs during a recent webinar hosted by the Consumer Bankers Association, Equifax auto finance leader Lou Loquasto emphasized how a healthy mix is important for any part of the credit market, especially automotive.
“If our industry makes all of the loans at 800 credit, losses are going to be super low. But if they make them all at 500 credit, losses are going to be super high,” Loquasto said.
“If you look at the mix over the past five years, we have been really steady since 2011,” he continued. “What that tells us — because auto loans are short term and losses, when they come, may come sooner rather than later in the loan term — we at Equifax expect the future performance of the recent pools of business to look very similar to what happened in 2014 and 2015. That’s one of the reasons we’re very optimistic about where we’re going.”
Loquasto highlighted how much banks and credit unions have grown their auto portfolios already, noting how these institutions had about 32 percent of the entire market back in 2006. But thanks to the overall auto industry surge between 2010 and 2015, Equifax pinpointed that share at nearly 46 percent.
“The segments that know their customers most intimately — banks and credit unions; segments that most people consider to be the most conservative — they’ve held a very steady market share since 2010. We view that as a very healthy sign,” Loquasto said.
The Equifax expert acknowledged concerns banks and credit unions in particular might have about the additional risk now baked into auto finance nowadays since terms are lengthening and outstanding balances are growing.
“When things are getting written about subprime, loan size or terms, that can trigger concerns that our lenders have to respond to — whether it’s concerns from senior management, regulators or others,” Loquasto said. “As it relates to loan size, cars are more expensive now. The loan sizes are going to be higher. But they’re being built much better than in the past so there’s less risk of a vehicle breaking down and causing very expense repairs or a customer to walk away. There’s also less need to trade up or upgrade quickly. Ten years ago a customer might be in a vehicle thinking in a year or two I’ll go ahead and get the car I really wanted. With the loan sizes going up, those cars have more features.
“We expect the duration of those loans to continue to increase. That’s a good thing for lenders and lender profitability,” he continued.
“At Equifax, we do believe that there is a great opportunity for banks and credit unions in particular to better serve their near-prime and non-prime customers. For subprime, there’s not a ton of lending being done by the banks and credit unions, but the lending that is being done has very low losses, representing a great opportunity going forward,” Loquasto went on to say.
Part of why Loquasto emphasized why banks and credit unions should consider being prudent when buying deeper down the credit spectrum is something both he and fellow webinar presenter Cristian deRitis touched on: Vehicle sales are about to slow. It’s what deRitis, the senior director at Moody’s Analytics, described as the difference between “pent-up demand” and “spent-up demand.”
Because of an anticipation that interest rates will rise later this year and into next year, deRitis said, “that will slow volume somewhat as buyers who may be taking advantage of the cheap financing today decide in the future either to pay cash or to use other financing vehicles such as home equity to finance their transactions. There are some other factors that are going to drive demand as well: pent-up demand, or really the exhaustion of pent-up demand.
“Prior to the recession, we had sales volume in excess of what the trend would say,” he continued. “From a period of around 2000 until 2008, we would have classified this excess as a period of spent-up demand; essentially, consumers were buying too many vehicles or more vehicles that needed to keep up with equilibrium and pulling sales forward.
“Then we had the recession, which certainly created a collapse in new-vehicle sales,” deRitis went on to say. “It gave us some time to work off some of that spent-up demand, so from about 2008 until 2011, we worked off much of that excess spending, those pulled forward type of vehicle sales. At that point we started to accumulate pent-up demand, we were still well below the equilibrium level of sales.
“Based on the analysis, even today, we’re in a period of pent-up demand. There’s still buyers out there that put off purchase of a vehicle during the recession and recovery period that still want a vehicle. They’re still going to fuel vehicle sales in the short term,” he added.
Closing the thought, deRitis shared that Moody’s projects that level of equilibrium sales to be about 16.5 million to 17 million new vehicles, a figure the firm expects the market to generate through 2018.
Later during his portion of the webinar, Loquasto added, “If lenders want to continue healthy growth rates, lenders are not going to be able to rely on increasing car sales and pent-up demand. They’re going to have to look to tweak their strategies — banks in particular.”
Subprime auto finance provider Western Funding has a new underwriting system that the company claims will cut the time of getting funds to dealerships in half.
The company recently announced the release of its new automated underwriting system, which is designed to improve the verification, processing and management of deals and adds automated queues and workflows to shorten funding times.
“We’ve listened to our dealers and recognize that the timeliness of cash flow is one of the most important factors when selecting a lender. We are dedicated to providing our dealer base quick funding to help them grow too,” Guerin Senter, president of Western Funding, said in a press release.
Western Funding developed this new underwriting system during the first few months of this year, starting the process in January. It activated the system in May and hopes for increased efficiency and accuracy in the underwriting process.
Over the past two years, Western Funding has grown significantly, building a portfolio of more than $100 million. The company, which as been in the subprime auto loan industry for more than 50 years, embraces new technologies to make the lending process faster and more profitable.
Westlake Financial Holdings, the parent company of Western Funding, hopes that the system will continue to improve the process of sending funds to their dealer base. WFH president Ian Anderson said in the release that the company is “very supportive of Western Funding’s future.”
In an effort to strengthen finance companies’ underwriting of potential customers with soft credit histories, TransUnion and FICO on Wednesday rolled out the availability of FICO Auto Score 9 XT based on TransUnion CreditVision trended data. The firms highlighted the new score is specifically catered to the auto finance marketplace and includes several new features, including trended data from TransUnion’s CreditVision.
Whereas a traditional credit report offers a glimpse of a consumer at a snapshot in time, executives explained trended data assets leverage an expanded view of credit data with up to 30 months of historical information. This includes available information on each loan account, including payment history, such as dollars paid, amount paid versus minimum due and the total amount borrowed over time.
“The use of trended data from CreditVision in FICO Auto Score 9 XT gives our auto finance customers an in-depth view of borrowers that they previously could not access,” said Steve Chaouki, executive vice president of TransUnion’s financial services business unit.
“We are excited to collaborate with FICO to make their score available through CreditVision for the auto finance community,” Chaouki continued. “Now, lenders and dealers will have a familiar FICO score through which to communicate the predictive power of TransUnion CreditVision. The score will help lenders fund more auto loan transactions at competitive rates, benefitting consumers, dealers and lenders.”
In addition to the use of trended data, the new FICO Auto Score 9 XT ignores collection agency accounts that have been paid off. And like other scores in the FICO Score 9 family, it differentiates unpaid medical accounts that have gone into collections from unpaid non-medical accounts that have gone into collections.
“FICO Auto Score 9 XT is the latest innovation from FICO designed to address the interests of both lenders and consumers,” said Jim Wehmann, executive vice president of scores at FICO. “We’ve worked with TransUnion on a score that examines the way a consumer’s behavior is evolving.
“This helps creditworthy consumers qualify for the best credit terms available to them, and helps auto lenders expand their portfolios safely by making more precise decisions about loan terms,” he added.
The firm went on to mention the expanded view of data from TransUnion CreditVision can reveal trends and behaviors, such as consumers making on-time payments, paying more than the minimum amount due, reducing total amounts borrowed or decreasing utilization over time.
“The inclusion of CreditVision in FICO Auto Score 9 XT enables dealers and lenders to take these behaviors into account. This is especially important because a traditional credit report may tell you a consumer has $7,000 in credit card debt, but one using trended data will show you whether they have built up or paid down that balance over time,” Chaouki added.
FICO Auto Score 9 XT based on TransUnion CreditVision trended data will also be made available by national credit reseller ProMax Unlimited.
“CreditVision and FICO Auto Score 9 XT are evolutionary leaps forward and will allow lenders to make better decisions and give dealers tools and information to close more auto loan transactions at competitive terms,” said John Palmer, president and chief executive officer of ProMax Unlimited and ProCredit Express.
“TransUnion CreditVision is already available now to any dealer through ProCredit Express, and we will make FICO Auto Score 9 XT available in 2016,” Palmer went on to say.
We’ve all heard the news on rising auto loan delinquencies. Since February, auto delinquencies in the subprime market are at their highest rate since 1996. This presents a significant issue since increased delinquencies usually indicate that more defaults will happen down the road. So what are auto finance professionals to do in times like these?
While it may be irresponsible to approve loan applications at higher velocities to borrowers with little or no credit, some auto lending businesses cannot afford to decelerate their loan application approval process, especially during an intensely competitive auto lending climate.
So by all means, step up your loan application evaluations, and accept those subprime deals. But times like these necessitate a smart strategy that cuts costs and mitigates risk as much as possible. Don’t let unexpected losses drive your business bankrupt.
What I often say to finance companies and buy-here, pay-here dealers is this: While you can’t control external forces at hand, you can always shape the battlefield first by mitigating as much risk as possible when it comes to vehicle depreciation and loss. Using GPS vehicle tracking technology as a collateral management solution (CMS) and vehicle recovery tool is really one of the most effective and simple ways to do so today.
GPS technology enabled on your asset is literally the lock on the door — it will allow you to mitigate risk and control the value of your assets as much as you possibly can. It saves lenders money in the long run (collections and guaranteed vehicle recovery if necessary) and reduces the amount of bad debt on the books.
GPS vehicle tracking as a better collections strategy
With a collateral management solution, lenders are able to be more effective in their collection efforts. As auto payments become delinquent, auto finance professionals encounter the loss of loan payment in addition to the cost of collections labor used to recoup debt owed. Accounts are often passed around from one collector to the next, in hopes that one collector will gain some sort of rapport with the borrower or their family.
Some borrowers just may need help with making on-time payments, and this is where CMS can be used to actively coach borrowers on payment. With the device embedded in the vehicle, you can sound a payment reminder to the borrower when a payment is either almost due, due or past due.
While some borrowers are just bad payers and need some coaching to become better, others need a more hands-on approach. The GPS device in the vehicle can shut off the starter when a borrower is consistently delinquent on car payments. Or if a borrower drops or reduces full car insurance coverage to liability only, a lender can disable the starter to limit the risk of the vehicle becoming damaged with no insurance coverage on it.
Shortening the time and eliminating the costs associated with vehicle recovery
Recovering the vehicle asset is the last thing that any auto finance professional wants to do, but it is necessary on occasion. Time is of the essence when it comes to vehicle recovery. The quicker you can recover the depreciating vehicle means less money spent on collection labor, reconditioning and auctioning, and the higher the value of the vehicle assets. Having a GPS device embedded within a vehicle enables you to locate a car within seconds, not hours or days.
Repossessing an asset sooner rather than later will produce an asset with the most amount of value and reduce the deficiency owed by the borrower, with a much smaller delinquent balance that a lender is more likely to recover. Having to recover less money reduces the amount of bad debt, and less bad debt is what most lender businesses need.
GPS vehicle tracking as a solution, not a one-off commodity
I recommend partnering up with a GPS tech provider that takes a solution-based, CMS approach to how GPS technology and software can solve many finance company and BHPH dealer issues — rather than just giving the ability to show a vehicle on a map. Here are some points that you want to evaluate a GPS tech provider on:
1. A trusted, proven provider with years of history and innovation under their belt.
2. Rigorous privacy controls that keep your customer data safe and you in compliance.
3. Powerful software that allows you to easily track and locate vehicles for recovery.
4. An intuitive user interface that lets you to track, manage and get on with your day.
5. A provider that listens to its lenders and dealers, adding new features according to their needs.
6. Reports and alerts that can be easily customized to fit how you run your lender business or BHPH dealership.
7. A national network of GPS experts who can install at any location in 24 to 48 hours.
8. Guaranteed vehicle locates at any hour from any mobile device.
Paul Rosenthal is the vice president of automotive telematics solution at Spireon, and has more than 20 years of management in customer service and sales. Previously, Rosenthal managed regional accounts for both CalAmp and LoJack. For more information on GPS vehicle tracking and collateral management, visit www.spireon.com or call at (855) 360-9427.
The Consumer Bankers Association asked Georgine Muntz, chief operating officer of defi SOLUTIONS, to be a presenter during its annual conference earlier this spring. After gathering key points from other experts who shared presentations at CBA’s event, too, Muntz decided to offer a bonus.
Along with giving another opportunity to download her presentation titled, “Driven to Digitize,” Muntz assembled a list of 10 elements she believes the “smartest” finance companies and dealers will need to do to remain relevant going forward.
Her recommendations for finance companies mentioned:
—Automate: Get rid of paper processes wherever possible.
—Digitize and mobilize: Organize your entire leadership team behind a digital mobile strategy.
—Collaborate: Seek the best solution, whether from inside or outside of your organization.
—Excise excuses: Don’t hide behind fears of compliance and technology. Start changing now.
—The future is now: Alternate currencies and virtual reality are current realities so we should prepare for changes in our markets.
Muntz continued her list by articulating five more ideas aimed at dealers in particular, including:
—Embrace the Gen Y way: No hassles. No pressure. You want to sell more than they want to buy.
—Be smarter: Make it all happen in a flash and on a smart device.
—Modify ownership models: Multi-ownership, car sharing. Think Zipcar or spot use of cars on lots.
—Virtualize experiences: Create virtual shopping, virtual car design, and virtual test drive experiences.
—Create brand loyalty: From purchase to service, make yours an experience buyers must have.
“I’m often accused of being in a hurry, or thinking about ten paces ahead of the pack, but I believe inevitable change is arriving like a spring thunderstorm. Whether you’re ready for it or not, you’re going to have to deal with it,” Muntz wrote in a blog post on defi SOLUTIONS’ website.
“My heart, my work, my life is all tied up in the vehicle finance industry, its people, products, opportunity, and I see myself and my energies as a catalyst for firming up a technology foundation that is going to serve these next generations well into the future,” she continued.
“Lender or dealer, if you want to win big or even remain in the lending game for the long run, it’s time to spring into action,” Muntz went on to say. “Doing nothing isn’t an option.”
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.
