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Better Collections Through Technology

October 2009, F&I and Showroom - Feature

by Rob Hagen

Contrary to popular belief, repossessing a customer’s vehicle should be the last resort when it comes to the buy-here, pay-here (BHPH) business. It’s bad for business and it’s an outdated philosophy.

Unfortunately, some dealers are ready to “hook” a customer’s vehicle if they are one day late on a payment. What a dealer needs to remember is these customers have a history of not paying on time. That means they need to be trained on how to stay current on their payments, which is what payment assurance devices are designed to do.

Another common misconception is that all devices are created equally. There are two basic types of devices: GPS devices and payment-reminder devices. Both tout shut-off features, but they vary greatly in how they’re used.

Payment-reminder devices are for dealers who want to collect their money. They are also proactive tools that help dealers nurse customers along during rough times. GPS devices are for dealers who want to collect their collateral. They are reactive tools that allow dealers to quickly make repossession decisions.

Both products serve a fantastic purpose and can be great assets to any BHPH dealer. Deciding on which works best depends on that dealer’s business plan. “Dealers have different ways of managing their portfolios and we have products to assist them with any business model,” said Jake Frank, co-founder of PassTimeUSA. “In fact, our Elite product is unique to the industry in that it combines both the GPS and payment-reminder technology.”

Payment assurance devices go a long way in eliminating “skip hazards,” but skips are going to be something every BHPH dealer has to deal with. Repos will happen to any portfolio, but at least you have your collateral to remarket or sell off at the auction to minimize your loss.

On a skip, you will have to write off the entire amount of the outstanding contract. If you are new to BHPH, one of your fundamental underwriting guidelines must be to eliminate possible skips. That means you need to be wary of customers with credit bureaus that list addresses from several different states.

One precautionary measure I always recommend to my dealers is to MapQuest the customer’s address. If it’s an invalid address, this is the easiest way to catch it. That’s not to say I haven’t been fooled before, but most of those instances occurred before technology was available.

Cybertracking Revolutionizes Collections

I once had a customer’s phone bill with his address on it, which I thought was golden. I went to his house to collect payment on a bounced down-payment check, but the address did not exist. What a horrible experience that was. Turns out the customer went around writing hot checks after opening an account with $50.

Regardless of how diligent you are, this situation will still happen every once in awhile. Some customers will just try to get one over on the system whenever possible. I refer to these people as “credit criminals.” They will clean up their credit reports and lie right to your face just to be able to get into a car.

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