Technology in the subprime automotive finance market to assist in collections and repossessions has been widely adopted. First introduced decades ago, just about everyone in the industry is using GPS/collection technology to track assets, send payment reminders with the goal of improving both the collections process and the recovery process when needed.
GPS (Global Positioning System) is a commonly known term throughout the world. In the subprime auto finance, a GPS device is installed in a vehicle with the consent of the consumer and is used to locate the vehicle in the event the consumer defaults on the loan and it is necessary to repossess that vehicle.
3 of the biggest impacts of GPS in auto collections are:
1. Low cost to implement.
The low (and ever dropping) cost has made utilizing GPS on higher risk loans common place. The idea is that if a customer defaults on their loan, GPS can be used to locate the vehicle for a quicker repossession. It is common knowledge that the quicker a vehicle can be recovered, the fewer miles will be on it, the better condition it will be in, and the cheaper it will be to recondition for resale.
In addition to “standard” GPS, many solutions on the market today include additional tools to help with collections. PassTime, a leading provider of GPS Solutions for over 25 years has been at the forefront of innovative solutions that address both collection and recovery needs of their customers. The goal of these collection tools is to keep the consumer making their payments throughout the life of the loan, thereby decreasing delinquency rates and making it easier to identify troubled accounts. By improving the collection process, the BHPH dealer or finance company can benefit from improved cash flow, lower overhead, and widen its lending criteria.
2. Consumers are calling the collectors. Not the other way around.
One of the biggest benefits to using GPS technology, and specifically the collection tools that often accompany GPS technology, is that it changes the dynamics of communication between the dealer/creditor and the consumer. As previously noted, without incentive to do so, a consumer may avoid communication with their creditor, especially if they have fallen behind in payments. With proper use of GPS technology and collection tools, the communication scenario is reversed, where the consumer initiates communication with the creditor. When this technology is used as a stipulation of financing and is properly disclosed and explained to the consumer, that consumer now has incentive to communicate with the creditor. If they do not properly communicate and they are late or behind on payments, their vehicle could be disabled.
Because of this, the consumer makes the effort to make their payment on time. If they cannot make their payment, or may be late, they are the one calling the dealer or finance company, not the other way around. As a result, instead of hundreds of outbound collection calls, collection staff can stay on the phone, taking payments. The shift in communication makes collections easier and less confrontational.
3. Collectors can handle more accounts.
Another major benefit to using GPS technology with collection tools is that it allows each collection agent to handle more accounts, which can reduce overhead and resources for the business. As noted above, in a typical scenario without technology, collectors spend much of their time making phone calls to consumers, attempting to get in touch with them and to get them to pay. When utilizing this technology, collectors can quickly identify which accounts need attention and which do not, allowing them to be more efficient in their efforts and take on more accounts.
Look at it this way:
- Without technology
Collection agent who has 300 accounts, may on average have 90 to 100 of those accounts delinquent at a given time. Depending on the situation, the collector may or may not have a good idea of which 90 consumers out of the 300 won’t make their payment. So, the collector spends his or her time calling most, or all of accounts to get payments in each payment cycle.
- With technology
Th collection agent can quickly identify which of their 300 accounts may be a problem. By looking at which accounts have not made a payment and have not called in, the collector now knows who to contact. The collector can focus on the small percentage of consumers who haven’t paid or made contact, instead of the entire portfolio, or trying to guess which accounts to call. By needing to focus only on a small subsection of an account, collection agents can now handle a larger number of accounts overall, helping reduce overhead and the company grows.
Ready to see how technology can impact your collections?