Which Tracking Device Is Best for BHPH & Subprime?

Jeff Karg

By Jeff Karg

While there are var­i­ous types of devices offered by var­i­ous device providers for BHPH and sub­prime lenders, they are often thought of as all doing the same thing.  How­ev­er, there are real­ly two dis­tinct mod­els at work when choos­ing devices.  One is the col­lec­tion model; the oth­er is the repos­ses­sion mod­el.  Sev­er­al fac­tors can help you deter­mine which mod­el works best for your busi­ness and your goals.

The Repos­ses­sion mod­el

The tool most typ­i­cal­ly used for the repo mod­el is GPS track­ing devices.  The idea is that if the cus­tomer defaults on the loan, the lender wants the abil­i­ty to get the vehi­cle back as quick­ly as pos­si­ble, recon­di­tion it and resell it to anoth­er cus­tomer.  The faster and eas­i­er that process is, the more mon­ey the deal­er makes. If the deal­er can recov­ery their ini­tial cost for the vehi­cle before the cus­tomer defaults on the loan, and can quick­ly recov­ery the vehi­cle using GPS, the sub­se­quent resale of the vehi­cle is near­ly all prof­it.

The Col­lec­tions mod­el

The idea behind this mod­el is to keep the cus­tomer mak­ing their pay­ments on time, keep­ing them in the vehi­cle, and help­ing them stay cur­rent.  With­in this mod­el, the customer’s pay­ment behav­ior improves, result­ing in bet­ter cash flow for the deal­er and a bet­ter per­form­ing port­fo­lio. A Col­lec­tion Tech­nol­o­gy device is a proac­tive sys­tem that reminds the cus­tomer when their pay­ments are due.  While these devices are not fool proof, they typ­i­cal­ly result in a low­er delin­quen­cy rate for the port­fo­lio, improve cash flow for the lender, and help keep the cus­tomer in the vehi­cle.

Con­sid­er var­i­ous fac­tors with­in your over­all busi­ness mod­el to decide which device tech­nol­o­gy is best for you. One con­sid­er­a­tion should be whether or not you plan to sell your port­fo­lio to a finance com­pa­ny. Some deal­ers hold their own paper through­out the life of the loan. Oth­ers keep the loans for a while before sell­ing them off.  For those deal­ers who sell off their paper, they know that the bet­ter per­form­ing the port­fo­lio, the high­er the price they can expect. Finance com­pa­nies will look at the per­for­mance of the port­fo­lio over­all and, in many cas­es, fac­tor in if the loan has a device asso­ci­at­ed with it as well.

Jeff Karg, direc­tor of cor­po­rate com­mu­ni­ca­tion, PassTime USA, can be reached at jkarg@passtimeusa.com.

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