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 It’s bad for business and it’s an outdated philosophy.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.
One time, I had a customer run on me when I was heading up a BHPH department in Louisiana about 15 years ago. It took a couple of months, but we finally tracked down the customer and repossessed the car in Trout Run, Penn.
Professional recovery companies specialize in “hunting” down your runaway customers, and the most common practice being used today by recovery companies is a process referred to as cybertracking. Cybertracking does not replace fundamental collections practices, such as calling references, but it is a powerful tool for when a credit criminal tries to run.
Ron Brown, president of Confidential Security Investigations (CSI Group), is a self proclaimed hunter. His company has been a leader in cybertracking. “In all the years that I have been in this business, one thing has held true throughout: Man’s ability to skip trace has always paralleled their ability to communicate,” he said. “Early on, hunters would track people on foot. Then, as years went on, they started to track people by the paper trails they left behind. Now, we follow their electronic trails.”
Collectors Employ Social-Networking Sites
There are several companies out there that are in the business of gathering data. Much of their efforts are fueled by their ability to track an individual’s interactions and conversations online. Some of these sources are pay-as-you-go sites that provide access to public records, such as www.MasterFiles.com. There are also sites that allow free access, such as www.brbpub.com or www.BlackBookOnline.info.
“The key is being able to decipher the data,” said Brown. “Some data can be very misleading. Have you ever pulled your credit bureau and saw a job you never worked at or a residence you never lived in? We are trained to see the difference between the real and fictional data.”
Social-networking Websites are also great tracking tools, said Brown. “People update their Twitter, Facebook, and MySpace accounts several times per day, allowing anyone following their actions the ability to know just where they are and what they are doing,” he noted.
Imagine a skip feeling like he or she got away with the car without paying for it, and then heads out to lunch one day and Tweets: “Off to lunch at my favorite Italian restaurant, Tony’s.” And just as soon as he hits send, the CSI Group intercepts the updated message and sends a local field agent to Tony’s restaurant to look for their collateral.
Technology is assisting many BHPH dealers across the country to increase their profitability and minimize their losses. These products require a small upfront investment for a huge long-term profit.
Rob Hagen is the founder of SpecialFinanceCoach.com, a Houston-based consulting firm specializing in department setup and growth. He can be reached at [email protected].