How the “riskiest of the risky” auto loan portfolios become a lot more attractive with collectability insights powered by vehicle location data.
I recently spoke on a technology and operations panel at the Debt Buyer’s Association annual conference in Las Vegas. The debt buyers in the audience shared two major insights – the first, their concerns about compliance requirements becoming a huge cost to their organizations, decreasing their margins. The second concern is the issue of increased competition and the challenges they face to bid and buy portfolios at a competitive price, while at the same time diversifying their portfolios to create an effective yield across all pools of accounts. My response to their second concern? Consider auto debt. And their response? Isn’t that the riskiest of the risky? Here’s where things got interesting . . . I told them that it’s all about predicting collectability and vehicle location intelligence from DRN can help them do that. By overlooking auto debt they where missing out on collectible portfolios.
Let’s start with the claim that auto debt is the riskiest of the risky – it often is. At originations, lenders are buying deeper and buying more risk. And when these portfolios go up for sale, you are seeing the riskiest loans among them. While these debt buyers often avoid buying auto debt, competition is driving them to diversify. Credit card debt is somewhat saturated leading them to look for ways to add other debt classifications and still make money.
But what if these debt buyers had data that could help them determine the collectability of a portfolio before they buy it? At bid, they could price more effectively, and on the back end their collection rates would improve. Once these debt buyers realized how DRN’s vehicle location intelligence could help to determine collectability, they saw it as a type of predictive analytics that could impact portfolio value.
At DRN, we like to say that with DRN’s vehicle location intelligence, “We know something that you don’t,” and for these debt buyers that “something” adds up to a very real leg up on the competition. In fact, they were so intrigued by the value of DRN’s vehicle location data and analytics to help them determine collectability, that they urged us not to give this data to lenders. They reasoned that lenders with DRN’s vehicle location intelligence would price the debt higher.
We all know that even with lipstick, a pig is still a pig. Debt buyers considering auto debt as a competitive move need more than lipstick – they need real answers like DRN’s vehicle location intelligence that turn that ugly debt into a real looker.
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