The global pandemic has changed life as we know it, for better and for worse depending on the change. You’re likely seeing both positive and negative effects occur simultaneously at your Buy Here Pay Here, Franchise or Powersports dealership or Finance Company.
The pandemic led to an increase in used-car sales, as people reduced public transit consumption. Stimulus payments and tax refunds have contributed to the used-car buying boom. On the flip side, many states instituted moratoriums on repossessions. In 2020 alone, 22 million U.S. jobs were lost due to the pandemic, causing many people to fall behind on their car loans.
How is a dealership or finance company supposed to handle this macro-economic yo-yo? The answer might surprise you: vehicle asset-management systems. That’s right. Vehicle GPS tracking devices and the systems that go hand in hand with those devices can help you weather the ups and downs, especially when you and your business are pulled in opposite directions. Here are 7 reasons why you need a vehicle-tracking system.
Your vehicles are more than assets; they represent your future business success. You need to know where each and every vehicle or mobile asset is in case you need to recover one. With a GPS vehicle-tracking system, you can spend less time and money tracking it down.
With PassTime GPS vehicle solutions, customers improved vehicle recoveries by 24% and reduced the time it takes to recover a vehicle by 6.4 fewer average days. What’s more, our vehicle-tracking systems helped customers recover 20% more in actual dollars as a percentage of the remaining principal.
Moratoriums may have or continue to prevent you from recovering assets. But that doesn’t mean you should stop tracking your vehicle assets. Leveraging a car dealer management system with vehicle tracking enables you to know where your assets are, even if you can’t recover them. When the moratorium is lifted, you’ll be ready to swiftly and efficiently recover those vehicles.
PassTime’s OASIS online mobile app powers dozens of reports. For example, you can pull a vehicle’s current GPS location and its history to more accurately determine where it will be next. You can also use a remote starter-interrupt device to encourage that delinquent customer to contact your collections team and work out new repayment terms.
Clear, transparent and timely communication with your customers is key to building a mutually beneficial relationship. Payment reminders from your vehicle-management system are a simple and effective solution to help you maintain a positive cash flow. Starter-interrupt functions and vehicle-disable functions are other powerful tools to help you encourage customers to contact you about their overdue payment.
PassTime’s award-winning Elite solution, for example, provides your customers with automated payment reminders and allows you to remotely disable a vehicle if you need to. We’ve seen vehicle-tracking systems reduce delinquent payments, result in fewer loan defaults and improve consumer responsiveness.
If the pandemic has taught us anything, it’s flexibility. You need to be able to pivot and change course as needed. Car dealer asset-management systems give you that flexibility. You can work with a consumer to retool their payment plan with bridge or extension payments. You can focus on the consumers who need the most service.
PassTime’s proactive text/email alerts encourage your customers to contact you. As a result, less than 10 percent of customers require personal interaction from a collector, which means they can take on more loans without sacrificing customer service for the other 90 percent.
Maybe you think tough times call for a tightened belt. Maybe you see a vehicle-management system as a nice-to-have and not a need-to-have. The reality is, you can’t afford not to have a GPS vehicle-tracking system in place. When you add up all the lost time and money from delayed repossessions and defaulted loans and compare that to the cost of a GPS vehicle-tracking system, you’ll see there’s no comparison. The GPS vehicle tracking system wins every time.
Encore, PassTime’s wire-free, battery-powered GPS device, is our most affordable, sleek and easy-to-install vehicle-tracking solution. It fits in the palm of your hand and can be discreetly installed any number of places in under one minute. Yes, you read that correctly. Under a minute. And with our simple activation process and flexible power modes, you’ll have the flexibility and reliability to track vehicles for the long haul and to ramp up for recovery mode when needed.
When you collect more payments at a lower cost, your loans perform better for longer. You have lower loss rates. You can service more accounts with a smaller collections staff. You can price your inventory more competitively to sell more vehicles. All of which increase your portfolio value.
PassTime’s GPS vehicle-tracking solutions and accompanying apps help you improve operations and make more informed decisions. Our proprietary systems empower you to create dozens of reports that give you insights on what actions to take next so you can be more efficient and more profitable.
Reason #7: A partner in problem-solving
GPS solutions solve some of your biggest business challenges. But the company providing those GPS solutions shouldn’t just be a vendor. Your vehicle GPS solutions provider should be your partner. They should help you innovate. They should help you increase your efficiency. They should help you improve your portfolio value.
And that’s just what PassTime does. We’re a leader in GPS innovation and compliance. We’ll help you establish best practices. We’ll connect you with our nationwide network of certified installers. We’ll help you not only track your assets, but also modify consumer behavior for the better. And with 24/7 support, we’ll help you and your business succeed, no matter the twists or turns that appear.
Want to mitigate economic uncertainty at your dealership or finance company? Contact us.
Asset and collections management can change the way Buy Here Pay Here (BHPH) dealers and auto- finance companies, credit unions and banks approach their cash flow, a key barometer of financial health, for the better. Collecting more on-time payments remains critical to positive cash flow. But focusing on the money coming in is just one part of the positive-cash-flow equation. The other? Keeping tabs on the money going out. Both situations require thoughtfulness and a proactive approach.
Wireless GPS tracking devices are helping BHPH dealers and auto-finance companies improve their cash flow by reducing logistics and installation costs exponentially. Here’s how.
How much time does it take to coordinate GPS device installation per car? There’s the research to find a certified and reputable installer. Then the time to negotiate pricing. Not to mention the time it takes to get your vehicle to and from the installer. Let’s estimate that the whole process takes four hours, start to finish. But if you’re managing inventory across locations or on a rolling basis, the time adds up fast. You probably need a single person devoted just to handling the logistics.
With a wire-free tracking device, the logistics drop dramatically. You provide the GPS solutions provider with a shipping address and once the wireless tracker arrives, anybody can install it in under a minute, without the need for a GPS installation company. You’ve reduced the workload from hours per vehicle to minutes, freeing up your team to focus on more important matters like collecting on-time payments or developing alternative payment options. Vehicle GPS device installation couldn’t be easier.
Cutting costs is a tried-and-true tactic for positive cash flow. The key is to cut costs that can scale. Your goal is to make a difference of thousands of dollars or more. A wireless GPS device can make such a difference by cutting $50–100 in installation costs per vehicle. Let’s examine how these costs add up:
You can put your savings toward growing your inventory, investing in new data-driven technologies or hiring new collections staff. You’re able to do more on the actions that will help you sustain and grow your business because you’re spending less on GPS device installation.
Encore helps you improve your cash flow by giving you the vehicle tracking you need in less time for less money. It’s the easiest way to manage your assets, complete faster, lower-cost repossessions and expand the number of loans offered.
This completely wireless, self-powered solution features an ultra-lightweight, compact design that’s about the size of a credit card and weighs less than two ounces. Flexible power modes give you the functionality you need while extending battery life.
Ready to cut the cord? Watch this 45-second video to learn more.
GPS technology never stops. Since its inception by the U.S. Department of Defense in 1973, civilians and businesses have found new applications for GPS, from clock synchronization to contact tracing, just-in-time grocery delivery to vehicle tracking. For Buy Here Pay Here (BHPH) dealers and finance companies, reliable vehicle tracking can mean the difference between profit and risk.
Out with the Old
Most vehicle GPS solutions take time and a whole lot of wires—five or more—to install. Hardwiring a device to a car’s electrical system establishes a reliable power connection. But this type of installation takes more time and requires a certified installer. If you’re looking to install GPS devices at scale or in a short time frame, you’ll need an army of installers.
In with the Wireless
That’s why more and more BHPH dealers and finance companies are turning to wire-free, battery-powered devices that take less than a minute to install. The size of a credit card, these devices are sleek, self-contained and boast a long battery life. This new, easy-to-install tracking device has the potential to do for GPS what cell phones did for the telephone: freedom from wires, flexible functionality and go-anywhere technology that last up to four or more years.
Discover PassTime’s Wireless GPS Tracker
Meet Encore, PassTime’s easiest wireless vehicle-tracking device to install and the culmination of two decades’ worth of innovation. Advanced lithium battery technology powers Encore for up to four years. Flexible power modes maximize that battery life while meeting your vehicle tracking needs. Multiple power modes and profiles give you ultimate flexibility for endurance or recovery. Its stealthy appearance makes it more discreet. Our simplified two-step process makes activation quick and simple. These are some of the reasons why Encore from PassTime GPS is the easiest way to track a vehicle.
Learn more about how Encore is changing price perceptions here.
Value has a greater return than cost. In fact, true value sits at the intersection of your time, energy and money. What’s the secret to true value? Exceptional customer service. And it should come standard as part of your GPS tracking devices. But the question is, are you getting the best customer service with your vehicle GPS tracking devices?
As much as words help us communicate, they remain open to interpretation. Especially when it comes to something as subjective as customer service. Not sure what separates good, great and exceptional customer service? Read all about it in these articles: here, here and here. But let’s talk specifics for GPS tracking devices. Here’s what exceptional customer service means to PassTime.
It’d be nice if surprises with GPS vehicle tracking only occurred during normal business hours. But the reality is, they rarely do. That’s why 24/7/365 live support, from one human to another, is so important. No filling out tickets. No twiddling your thumbs waiting to hear back. Just immediate help when you need it most from a U.S.-based customer service representative. Your GPS solutions provider should understand what’s at stake when things go wrong and share your sense of urgency. They should want to find solutions as quickly and accurately as you do. Because they’re your partner. Day or night. Weekday or weekend. Holiday or every day. You want a vendor who is in this with you and providing top-notch service, especially when there’s a bump in the road.
Your vehicle tracking vendor’s customer service support system should have multiple tiers: the account manager, client service manager and 24/7 call support. This structured team can not only help you trouble shoot when immediate issues arise but also help you plan ahead. This means you can transition from reactive to proactive. They can help you find solutions not just to acute problems but underlying ones as well. It’s all about going above and beyond to help you make the most of your business and your bottom line.
You deserve a vehicle GPS solutions provider who puts you, your business and your customers first. You deserve a GPS tracking device with live, U.S.-based support 24 hours a day. You deserve a team dedicated to solving your business challenges efficiently and effectively. In short, you deserve the best. And that’s what you get with PassTime. A value-add partner who delivers exceptional customer service at every turn.
Touting exceptional customer service isn’t the same as proving it. The best way to prove it? Hearing from our customers. Here’s what they have to say:
“Lendcare Captial Inc. finds PassTime’s one-to-one service outstanding. Calling our account manager always proves helpful. Exceptional support and assistance.” —Vickie B., Ontario, Canada
“We at Express Employment Professionals, Littleton have been working with PassTime since 2014. We thoroughly enjoy our business partnership with everybody on the team. Highly recommend this loyal, honest, passionate company.” —Kristen S., Littleton, Colorado
“Highest quality GPS in the market. Fantastic service and support.” —Tyler R.
“Great product, great customer service.” —Kelly R., Lithia, Florida
Throughout modern history, we’ve often associated technology with progress as a continuous but positive movement. But of course, there are two sides to the coin and in some cases, technology can create as many problems as it aims to solve. When it comes to protecting your vehicle assets, you need the most reliable and best GPS tracking system out there. Here’s why:
Vehicle recovery success hinges on locating a vehicle quickly and accurately. It could be weeks, months or even years between the time the vehicle leaves the lot, or the loan is purchased and the time you need it locate it for recovery; which means your GPS vehicle tracking device needs to stand the test of time. You can’t risk your vehicle GPS tracking device failing at a time you need it most. A failed device could mean losing your initial investment and future revenue because you’ve lost the ability to locate the vehicle.
Your GPS tracking device should be manufactured by a company with rigorous testing standards. It’s not enough to spot check 20 percent of devices as they come off the line. Testing should be done 100 percent of the time. Testing each device leads to extremely low failure rates: under half a percent. Are you willing to risk your assets on a cheap, resold GPS tracking system or would you rather opt for one with stringent quality-control measures for better peace of mind?
You also don’t want to risk the success of your GPS vehicle-tracking system with shoddy installation. If you are using your own shop, makes sure the installers are properly trained and if you are hiring an installer, they should also be state-certified. GPS tracking devices can connect to five or more electrical wires in the vehicle. You need an installer who knows exactly what they’re doing to ensure your device functions properly miles down the road.
If something does go wrong, you have a question, or simply need assistance with your vehicle GPS tracking device, you want a partner who is there for you at any and every time of day or night. Your GPS tracking device vendor should be there for you when it’s most critical. Their top priority should be helping you recover your assets as efficiently and effectively as possible.
How does PassTime pull off virtually 100 percent GPS device reliability? With a proprietary testing method and end-to-end control of our products. At PassTime, we rigorously test each device as it comes off the line to ensure that both the GPS and cellular module functions properly. We design, develop, manufacture, distribute and support each one of our devices. And we work with a national network of state-certified, trained installers who perform thorough vehicle inspections complete with VIN and odometer verification. And we’re here 24/7/365 to help you recover your assets and troubleshoot issues.
Are you ready for the best GPS vehicle tracking system in the market? Get a quote.
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:
Ready to see how technology can impact your collections?
BHPH dealers and subprime auto finance companies who have been around for awhile are all too familiar with the typical process of trying to collect weekly, bi weekly or monthly payments from their subprime customers.
When a payment due date approaches, collectors analyze the accounts they are responsible for to see who has paid and who has not, and then begin making phone calls. Of course, these phone calls and attempts to communicate are often met with declined calls, disconnected numbers or other methods to avoid the collection agent. In worse cases, consumers may have left town or moved without notifying the creditor.
Significant resources are often required on the part of the collection agent to attempt to track down and retrieve payment from consumers who were late.
Due to the significant amount of time and effort that each collector spent trying to track down late payments, the number of accounts they could manage at once was limited. Historically, the average number of accounts per collection agent was about 300. Of course, that number varies widely depending upon business models, lending criteria, collection structure, etc. With the average number of 300 account per collector, naturally as the portfolio grew, so did the need for additional collection agent resources.
In addition to the overhead cost of the employees, cash flow is impacted. It doesn’t take an advanced degree to understand that late payments hinder cash flow for the dealership or finance company. While many are able to predict the percentage of payments that may come in late or not at all, cash flow for the business suffers.
While the cash flow, overhead resources and effort on the staff are all enormous challenges for dealers and lenders in the subprime market, perhaps the biggest underlying challenge is communication. In this traditional scenario, the consumer is typically on the receiving end of communication attempts from the dealer or lender. The general response on the part of the consumer is to avoid that communication attempt altogether. The communication is usually one-sided, met with resistance, and widely ineffective.
GPS has been around in the used car industry for decades. But, how exactly does the technology help with collections?
It works like this:
Without the use of technology, and specifically, collection tools, a 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 the use of GPS technology and collection tools, the collector 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?
With the average auto loan term at 69 months for new vehicles and 65 months for used vehicles, auto finance collection strategies may be as important as ever. And even with longer loan terms, car buyers are falling behind in their payments. As reported in 2019, there were more than 7 million Americans with auto loans that were 90 or more days delinquent at the end of 2018. Loan payment collection is the top concern of most auto finance companies.
Below are 5 strategies that auto finance companies can use to improve collection of payments.
1. Utilize Data
Data may be the single biggest tool that finance companies have to improve payment collection rates. When a potential customer signs up for a loan, make sure your business has a standardized process in place to gather the necessary personal information you need from them and to verify that the information is valid and up-to-date. Many third-party loan software systems have integrations that can provide additional checks or verification of the loan applicant’s personal data. If you’re using GPS technology to help secure the asset, incorporate the data you receive into your analysis to segment accounts that may have missed payments or are late. Eventually, you’ll want to use all the data at your disposal to find accounts that need help before they become delinquent.
2. Utilize Technology
As with nearly every industry, technology is making auto finance collection easier. If you work for one of these companies, it’s important that you are continually evaluating new technology tools that can make collections process go more smoothly. We recommend using technology to automate processes where possible. This can not only free up your employees to take on more accounts, but also help keep things consistent and standardized, a key component of staying compliant with the law. Payment notifications are a perfect example. Using a payment notification technology can ensure your communication with customers is not only compliant but also consistent. GPS is another example of technology that can help improve collections. We recommend choosing an automotive GPS provider that has the data and analytics built into their technology platform that will allow you to identify accounts that may be troublesome before they become delinquent.
3. Be Proactive
While it may seem obvious to anyone who’s ever worked in higher risk auto loans, don’t wait for the consumer to become delinquent before intervening. Typically, there are warning signs that a consumer may be having trouble making their payments. Late or partial payments, or changes in a customer’s communication frequency could be early warning signs. The best way to reduce risk in this type of situation is to be proactive and get in contact with the customer in order to get an understanding of what is going on. Once you know what the problem is you can develop a strategy and take the appropriate action to get them back on track.
4. Use a More Human Approach
With all the technology and automation available to finance companies, human interaction and the use of a more personal approach to collection is often lost. Consumers can easily ignore phone calls, text, and emails from overly aggressive or harsh collection agents. Trying to use a more human approach and treating customers with compassion and respect will often result in better payment collection rates and less hostility and resentment between your business and its customers.
5. Make Sure Your Staff is Properly Trained
Making sure your staff has comprehensive and ongoing training in the latest collections tools and technology is one of the most effective auto finance collection strategies. Does everyone in your organization know how to access and use all the analytics tools available to them? Are they leveraging all of the GPS provider data and other technology in their workflow? Are your staff familiar with the compliance procedures? We recommend setting up periodic trainings, perhaps quarterly, as a refresher for the staff to go over existing policies and procedures and introduce new technology features or processes. Ensuring that your staff is properly trained will reduce issues and improve collections and profits.
As the size and length of auto loans continues to increase collections will become more challenging than ever. While this certainly puts pressure on consumers, it also creates challenges for finance companies and credit unions. Having a strategy in place can help your business reduce delinquent payments and ensure more loans get paid on time.
PassTime offers GPS technology solutions that help auto finance companies and credit unions improve collections rates. Learn how we can help your business.
In mid-2017, Nevada legislation passed SB 350, a law that significantly changed how companies could use GPS and starter-interrupt devices to mitigate the risk of financing subprime consumers for automotive loans. And while several of the law’s stipulations make sense in protecting the consumer, like getting written consumer disclosure for the use of the device and providing override commands to help the consumer when in need, other aspects of the law had major impacts to the dealers, banks, and finance companies using the technology. Perhaps the most impactful aspect of the law was the stipulation that a starter-interrupt device could not be activated until the contract holder is more than 30 days past due.
For dealers and finance companies utilizing GPS and/or starter-interrupt technology, the goal is to remind consumers to make their payments, and to active the starter-interrupt after they have been reminded and a grace period has passed, typically 3-5 days.
As for how SB 350’s impact has been felt in the industry, you could ask Milo Trevizo, director of operations and finance at CAG Acceptance. Trevizo, who has been with CAG Acceptance for over seven years, oversees financing, loan serving, loan origination, remarketing, and legal among other duties.
CAG Acceptance, which services 21 dealerships in Arizona and an additional four in Nevada, essentially stopped all loan originations in Nevada after the law passed.
CAG Acceptance has used GPS/starter-interrupt solutions from the provider PassTime for nearly a decade as part of its program to provide financing to subprime and deep subprime borrowers.
PassTime was chosen by CAG as its GPS/starter-interrupt provider because of the quality of the product, the reliability and starter-interrupt capability of the solution. CAG also identified PassTime’s service as a key differentiator for the company – one that Trevizo said is difficult to quantify, but often just as important as any other company attribute.
“CAG Acceptance was formed to help sell cars to and finance customers that no one else would finance. The PassTime device allowed us to pursue that mission, because it helped us lower the risk that comes with financing consumers with deep subprime credit.”
Unfortunately, SB 350 made that mission just about impossible in Nevada.
In a June 29, 2017 article by Nick Zulovich, Senior Editor for Auto Remarketing’s BHPH Report, written just before the Nevada SB 350 was to take effect, Milo Trevizo was interviewed about his thoughts on what the new law would mean to their business.
From that article:
Trevizo … emphasized that doing business without the device’s impact would be nearly impossible. The finance company began to use these devices in 2011, and during a five-year span, Trevizo indicated CAG was able to provide vehicle installment contracts to 3,200 customers, an increase of more than 1,000 percent compared to the time before the provider used the technology.
“From our experience, the starter interrupt technology has enabled customers to obtain loans who would otherwise be unable to obtain financing,” Trevizo said. “We had been seeing vehicle repossessions in Nevada double, delinquencies triple and our loan volume reduced in the absence of starter interrupt technology.
“If the proposed legislation passes, we envision a sharp decrease in loans, leading to severe reduction in profitability. This will force CAG to cease conducting business in Nevada,” he continued during that March hearing. “This will mean customers of CAG may be left without an avenue to purchase a vehicle.”
Turns out, he was right. CAG continues to service the existing portfolios in Nevada but has stopped loan originations in the state after the new law was implemented. Delinquency rates on CAG’s loans in Nevada jumped from an average of 9% for accounts that were 1-90 days past due while using the PassTime devices all the way up to an average of 33% for accounts that were 1-90 days past due after the changes, according to Trevizo.
So, the legislation that was supposed to help consumers be protected, has resulted in a major finance company serving this consumer population to stop new business in the state.
The aspect of a device like this that many don’t realize is that it helps facilitate communication between the consumer with the vehicle and the finance company. When a consumer has a device installed on their vehicle and their payment is coming up, they are much more likely to contact the creditor if they cannot make their payment. Without the device, typically a consumer is going to go “radio silent” in that scenario.
Trevizo emphasized that they want the consumer to call in that situation and they can work out an arrangement including a payment deferral, change payment due dates, provide an extension, or even a full loan modification. But without contact and communication from the consumer, those options are very difficult.
“If a consumer gets too far behind in payments, the options become more difficult to implement – and unfortunately can result in losing the vehicle,” Trevizo said.
CAG previously used PassTime payment reminders and start-interrupt devices on all loans in Nevada. The company policy was to activate the starter-interrupt feature of the device after device payment reminders were issued and the consumer was five days past their due date. CAG customers were informed about the device, its features and how it would be used.
“We’d get calls at the four or five days past due period because customers did not want their ability to drive their car interrupted. Often, they would make their payments, or we’d work out an extension or deferment, etc. But, because this happened so close to the actual due date, it was much easier to work out an arrangement,” explained Trevizo.
With the change in law, users of this technology could not activate a starter-interrupt feature of a device until the consumer was at least 30 days past due. While that sounds like a benefit for the consumer, it was actually a determent.
“While we used to get calls around the four or five days past due mark before the law, afterward, those calls wouldn’t come in until around 29 or 30 days past due. At that point, the consumer is about a full month behind and essentially owes two payments,” said Trevizo.
If that happens, it makes it much more difficult for the consumer to ever catch up on their payments or to work out solutions that are affordable to them for the long run.
“Many consumers treated the “disable date” as their payment due date. So, if that moved from five days from their actual due date to 30 days after, those consumers were perpetually behind on their payment and were rarely able to catch up,” Trevizo went on to say.
Whatever the intent of the law’s stipulation was, the reality, at least for CAG, was that using starter-interrupt technology only after the consumer had been 30 days late on their payment resulted in payments slipping past the due dates to the point that consumers could rarely, if ever get caught back up.
According to Milo Trevizo, CAG Acceptance views GPS/starter-interrupt technology as a communication tool and not as a repossession tool. Of course, with GPS you can find the vehicle – but by that point, the situation has gotten to a place that neither side wanted.
For the consumer, they have given up on the vehicle and their payments and are more-or-less waiting until it the vehicle gets repossessed. For the creditor, they have had several (at least) missed payments on the contract and have to go through the repossession process on the account. Then they need to hire or send employees to locate and recover the vehicle.
Trevizo mentioned that without the use of PassTime’s devices, repossessions for the company went through the roof.
For many finance companies, by the time an account gets to that repossession stage, it is a poor outcome for the creditor and a poor outcome for the consumer.
Another aspect that is often overlooked is the device’s impact on voluntary surrenders. A voluntary surrender is when a consumer turns in the vehicle in a situation where they no longer intend on making the payments on the loan. With the use of a device, consumers would often voluntarily surrender a vehicle as they knew that the vehicle will be disabled shortly after the due date, so there was no incentive to keep it. With GPS only, or under the new law requiring disablement only after 30 days, voluntary surrenders dropped off considerably as consumers continued to drive the vehicle well past the payment due date adding additional wear and tear without reducing the balance.
The effect of the Nevada law to the business of CAG Acceptance is clear: the impeding restrictions on devices caused the company to stop loan originations in Nevada as it was no longer commercially viable.
However, these events also created a compelling view of the effectiveness of the devices themselves. When CAG discontinued the use of PassTime’s devices in Nevada, the result was a comparison of accounts that had devices associated with them and accounts that did not have devices associated with them. While using PassTime devices, CAG’s Nevada portfolio averaged a 9% delinquency rate on accounts that were between 1-90 days past due. The use of payment reminders and starter-interrupt 3-5 days after the due date kept delinquency numbers down on subprime accounts. Compare that to the delinquency numbers without the use of devices; they jumped to an average of 33% on accounts that were between 1-90 days past due. A 24% increase in delinquencies resulted in the accounts without PassTime devices.
As mentioned, CAG Acceptance made the business decision to stop new originations in Nevada as a direct result of the law.
Milo Trevizo stated, “When you are talking about financing people who have deep subprime credit, there is not a lot of wiggle room. Statistically, the risk of default is very high. Starter-interrupt devices helped reduce or mitigate some of that risk. The law in Nevada is so restrictive on the technology that it makes it virtually unusable. Without that additional protection against risk, it just doesn’t make sense to continue to do business in Nevada.”
So, for CAG, the result was to cease additional loan originations in Nevada and focus solely on Arizona.
While there are likely still some options for consumers with deep subprime credit to get vehicle financing, Trevizo stated, “I don’t see other finance companies rushing in to Nevada to finance people in that position. My guess is that a lot of these deep subprime consumers aren’t getting loans.”
For a law that was positioned as a way to help consumers, one impact may be that it is even more difficult to get vehicle financing in the first place.
For PassTime, the company continues to take the lead, along with industry partners, to proactively monitor legislation and meet with lawmakers about the technology they provide. The company’s hope is that with continued education about how devices work, how the help the industry, and the impact of restrictions around them, lawmakers can make informed decisions and hold a more comprehensive view when creating legislation.