Tough
financial times boosts communication, Toyota FS struggling,
internet enquiries falling
COLLECTION STRATEGY
Recession
bolsters lender-agency ties
Rough financial times are inspiring lenders
nationwide to rev up their communication frequency with collection
agency-partners. The goal: to prevent liquidation erosion and
ultimately improve both parties’ bottom lines.
“Our success is contingent on theirs,” said Mike
Goins, senior manager at Chrysler Financial, during an executive
panel at the Collections & Credit Risk Conference held
last month. “Expectations must be set up front.”
Goins identified three critical areas that lenders
and potential agency partners must hammer out before working
together: outlining portfolio expectations, defining punishments,
and ensuring that agencies can profit off the paper.
“At the end of the day, we are not here for fun,”
he said. “We are here to make money.”
Lenders are broadening lines of communication with
their agencies, especially these days.
“The economy will be tough,” said Kevin O’Donnell,
agency manager at Wells Fargo & Co.
But lenders can maximise collection results by
being “straight shooters” with their agencies during the honeymoon
period.
“Tell them what they have and what you expect from
that,” O’Donnell added.
Open communication is just one strategy lenders are
using to prevent liquidation erosion. Other techniques include
drilling down on individual collectors’ performance and assessing
agencies’ overall financial health.
O’Donnell, for one, spends a chunk of his time
auditing pre-charge off agencies to determine whether collectors
are reaching their goals — or even setting the correct ones in the
first place.
Part of O’Donnell’s participation also means
recognizing strong performers. Indeed, O’Donnell used to maintain a
spreadsheet of all of his collectors’ achievements and would
recognize the top performers. He also kept tabs on whether they
continued to work on Wells Fargo’s portfolio. The reason: to keep
the best collectors working the bank’s paper.
For an overall agency health check, O’Donnell
typically receives weekly remittances from Wells Fargo’s agencies.
If something irregular appears, Wells Fargo will make “surprise”
audit visits.
Chrysler Financial, meanwhile, also puts a premium
on studying financials to curb losses.
“My reoccurring theme is, ‘Stay financially
solvent’,” Goins said. “If you can’t manage your business, you
won’t manage ours. [There are] great agencies out there. We are
very selective.”
The captive, for one, combs through agencies’
financial statements, searching for data ranging from cash flow to
assets.
Chrysler also looks for agency irregularity, such
as whether remittances are coming on time or if a maintenance file
is normal.
“There are a lot of agencies in financial
distress,” Goins said. “We need to make sure our agencies aren’t
them.”
Yet another strategy lenders have taken to tackle
eroding liquidity is giving agencies more payment flexibility
power.
Take Regions Bank. Vice-president Ken Muldowney
began allowing his agencies to offer consumers longer payment
settlements as another strategy to overcome a “significant decline”
in both internal and external collection rates.
“Now, we let it go out one year to two years to get
people paying,” Muldowney said.
At the end of the day, the best strategy for
agencies seeking auto lender relationships is simple.
“Collect more money,” O’Donnell said. “That one
works.”
MARKETSHARE MONITOR
Toyota FS in free
fall
Toyota Financial Services’ business in
February 2010 dropped in all major US states compared with one
month earlier, according to the latest figures published by
AutoCount, a unit of Experian Automotive.
In California, the captive arm of Toyota recorded
11,857 loans and leases, down from January’s 17,035 figure. In
Illinois, it dropped from 4,139 leases in January to 2,586 in
February, and in Texas from 5,760 to 4,533. Compared with one year
ago, however, all Toyota FS figures still show a significant
improvement.
In California, monthly figures were relatively
unchanged for Wachovia Dealer Services (from 8,900 deals in January
to 8,760 in February). The drop was more significant for Chase Auto
Finance (from 7,336 to 6,192). In Illinois and Texas, Chase was the
top captive, with 3,232 and 4,683 deals respectively. Both figures
are relatively unchanged from one month before.
In Michigan, GMAC and Ford Motor Credit leased most
cars. GMAC recorded 6,439 units under lease or loan agreement, with
no significant change from January, but massively up if compared
with one year before – the worst months of the recession, when the
lessor only recorded 2,733 deals in the state. Ford Motor Credit
increased from 3,796 in February 2009 to 4,573 in February
2010.
INTERNET QUERIES
Still slipping
Aside from a few days in early January,
internet queries about auto finance this year have consistently
tracked below volume in 2008 and 2009, according to the Google Auto
Financing Index.
The index tracks US search queries related to terms
like ‘loan’, ‘lease’, and ‘car loan’.
In March, the index averaged 1.11, compared
with a 1.20 average in the same month of 2008 and 2009. It will be
interesting to see whether the index ticks up as it has the past
two Aprils. The index is set to 1.0 on 1 January, 2004.
