DealerTrack Can Help Dealers in the Subprime Business
LAKE SUCCESS, N.Y. — DealerTrack considers itself a vital resource for dealers working with credit-challenged consumers. The company boasts it has partnerships with all the leading lenders in subprime industry.
"We've seen significant growth in the subprime industry," David Trinder, senior vice president of network solutions, explained to SubPrime Auto Finance News. "It appears to be a growing segment of the market."
Trinder said DealerTrack works with all the leading subprime lenders in the country, including regional and national.
"Subprime has a very good representation with us. If a dealer wants to do subprime, DealerTrack is the place," he pointed out.
"We're very, very big in the subprime market," he continued. "There's a different spectrum these lenders will factor. Some lenders are looking for near-prime business while others specialize in prime but are succeeding in widening the spectrum of lending provided to certain dealers."
A recent trend appearing in the industry is that prime and subprime lenders are forming relationships. This partnership surfaces when a prime lender receives an application from a dealer that it finds it cannot approve. If the prime lender believes the application is more likely to be approved by a subprime lender it has partnered with, the prime lender will pass the application along to be reviewed, according to Trinder.
The dealer won't hear a response until the second lender has reviewed the application. Both responses will be sent back to the dealer at once, Trinder explained. For instance, a dealer may receive a denial from the prime lender, but acceptance from the subprime lender after both have completed review.
"This began when prime lenders started buying subprime lenders," Trinder said. "The idea of the lender was, use me for prime and if I can't fund this, I will help you find someone who can. Our system facilitates this in a very economic and smooth session."
Trinder said there are two primary ways a dealer can apply to subprime a lender via DealerTrack's network — Payment Cawl and traditionally.
Payment Cawl allows dealers to apply for credit for a consumer without attaching an asset, according to Trinder. This means a dealer doesn't have to identify a vehicle on his lot that needs to be included in an application for approval.
A dealer can use this avenue when he simply wants to find out how much a consumer will be approved for, Trinder noted.
"They send in an application, basically saying ‘I've got John Smith. How much are you willing to fund him for?' If he gets funding for $20,000, I can then decide what vehicle to put him into," Trinder explained
With Payment Cawl, the dealer can send applications up to six lenders, and Trinder said sending an application to more than one lender is the best recourse.
"Using Payment Cawl, dealers can find out exactly how many credit issues surround a potential customer," Trinder said.
Dealers can also send in applications through the DealerTrack network for consumers traditionally, meaning a dealer analyzes a customer's credit bureau information and more, and identifies a vehicle on the lot that meets a certain lender's requirements. After deciding which lender is most likely to approve a deal, a dealer uses the DealerTrack network to send an application to that specific lender.
"Through the traditional way, dealers generally only send the application to one lender because they have a better understanding of who that customer is and which subprime lender is likely to finance the customer," Trinder said.
However, he noted, "It's not common to send to all six. Usually a dealer will send it to three or possibly two at most. If an application is sent to too many lenders, it can become unwieldy having to choose one at the end of the day. It's more common for dealers to get to know finance sources and what they are looking for."
Another benefit to sending the application to just one lender via the traditional means is that the dealer is more likely to use that lender if approval comes through.
"Lenders can get tired of sending approvals if the dealer doesn't end up going through them," Trinder highlighted. "If a dealer gets 100 approvals from a lender and doesn't use any, it just turns the lender off. The lender may stop approving deals for that dealer if he is just using the network to check up on people."
According to Trinder, dealers tend to be aware of this and are usually careful about who they send applications to through the network. They also establish relationships with lenders, so dealers know what a certain lender is looking for and that lender is comfortable working with that dealer.
To make matters simple for dealers, DealerTrack said it offers one standard application for all lenders.
"We have a standard application that makes us must faster," Trinder pointed out. "Also, this means that once a dealer has complete information, he can forward it to any lenders he wants. It would make it very complex to have a different application for each lender."
Dealer, Lender Communication
One of the primary challenges for dealers working in the subprime business is establishing or expanding relationships with lenders. In order to help dealers with this, Trinder said DealerTrack's network was designed to get dealer financials and more in front of the right people at lenders to establish a relationship.
"We have a lot of other features that help a dealer and lender connect with each other," Trinder explained. "We give dealers the ability to contact the lender through our system. We also identify who to contact at that lender, this way dealers can establish relationships with lenders.
"We also give dealers and lenders the ability to write notes to each other," he continued. "For instance, a lender may send a note to a dealer saying, ‘I conditionally approve you, but you need to increase the down payment by $1,000.' These can be written and sent alongside the applications, so when a lender receives an application, he can also see any notes the dealer sent. This avoids having to get on the phone and wait.
"We also have it set up so a lender can highlight rates and programs electronically, so a dealer can print it out and decide which option works best for which consumer. It also helps dealers get to know the lenders," Trinder explained. "We facilitate all this communication."
At the End of the Day
In the subprime business, Trinder said it's more challenging for lenders to approve applications automatically, so dealers may need to have a bit more patience waiting for the go-ahead.
However, he said subprime lenders work as efficiently as possible and DealerTrack offers a lot of programs to help lenders speed up the approval process.
"At the end of the day, the subprime lender works very hard to get back to the dealer as quickly as possible," Trinder said.
DealerTrack Reaches 325 Active Lending Sources
DealerTrack announced that the number of active financing sources connected to its network has hit reached 325.
"The power of the DealerTrack network continues to grow as we connect more financing sources, dealers, and other providers," said Mark O'Neil, DealerTrack's chairman and chief executive officer.
"Providing dealers with the largest network of automotive lenders helps dealers sell more cars and enhances origination potential for the financing sources. More lender choice means greater ability for dealers to choose financing that meets dealer objectives while serving customer needs," he added.
According to the company, about 89 percent of all franchised dealers in the United States are active in the DealerTrack network.
DealerTrack Launches InventoryPro
Recapping other recent news, at the National Auto Dealers Association's Convention and Expo, DealerTrack launched InventoryPro — an inventory management solution for dealers.
InventoryPro was created to empower dealers and leverage their knowledge and expertise with analytical tools that manage inventory turnover through the use of dealers' specific sales history, as well as market data, according to officials.
The program was created to offer recommendations to enable dealers to take control of their inventory and stock more of the vehicles that turn faster and generate higher gross profits, while quickly disposing of those that are less profitable.
It takes historical sale info, inventory information and more and makes recommendations on what the dealers need for their lots, according to Raj Sundaram, senior vice president and head of dealer solutions for DealerTrack.
Ultimately, the program will tell a dealer what he needs down the road and offer a dealer the ability to find what he needs for the right price, Sundaram told SubPrime Auto Finance News.
Additionally, officials said InventoryPro will provide dealers with a broad range of tools to appraise and book out their inventory, soon integrating values from Manheim Market Report, in addition to information from N.A.D.A., Black Book and Kelley Blue Book.
The company used its DealerWire subsidiary to help create the new program. Sundaram said DealerTrack did not do a pilot, but reengineered technology it already had and relaunched it. The system's appraisal function allows dealers to review patterns and basically see a report card of who needs assistance, Sundaram noted.
DealerTrack acquired DealerWire solution last year, and that program will be phased out as subscribers are transitioned to the new product at no additional charge.
Executives said they focused on keeping the tool simple, to make it user-friendly for dealers and used-car managers. Basically, the recommendations and inventory analysis are offered on one screen, and dealers can elect to look at appraisal information and more by selecting that function and viewing it on another screen.
O'Neil, said, "With the continued market pressure on new-vehicle sales, we believe dealers are placing a growing premium on maximizing the profitability of their used-vehicle operations.
"Systematic inventory management, based on industry data as well as the dealerships' own sales and profitability records, should increase inventory turns and deliver dealers much needed improvement in profitability," he added.
With the launch of InventoryPro, DealerTrack said it is beginning its introduction of a comprehensive inventory solution. Throughout the year, officials said a series of products and services are expected to be deployed to further enhance dealers' inventory needs, including:
—Integration with Chrome's Automotive Description Service, which will offer dealers the ability to deliver accurate and comprehensive vehicle descriptions.
—An inventory exchange that will provide dealers with a single point of access to inventory on a real-time basis from various auctions, including Manheim and a variety of ATC-Onlane hosted wholesale auction Web sites, including ATC Open.
—Inventory management and analytical tools through InventoryPro.
—ALG pricing and market data as well as content from Chrome.
All of these capabilities will be provided as part of the DealerTrack suite of products, which was designed to allow dealers to leverage a single platform.
"We are pleased to partner with DealerTrack to provide the Manheim Market Report to dealerships across the country," said Lynn Morgan, vice president of Manheim Consulting.
"InventoryPro is another opportunity for our organizations to broaden the services provided to dealers to help them gain more control over their inventory costs," Morgan continued.
DealerTrack said its main objective is to provide dealers a way to manage all of their inventory needs in one place and then create a marketplace for dealers to buy and sell inventory in a real-time environment.
"If you're going to tell a dealer what he needs, you need to tell him where to find it," noted O'Neil.
InventoryPro will be easy to use and features enhanced functionality, including best-in-class vehicle appraisal capabilities, according to officials. InventoryPro will also be integrated with other DealerTrack sales and F&I solutions, offering dealers the opportunity to take a vehicle from inventory to structuring, financing and funding a deal – in one seamless, paperless process.
According to O'Neil and Sundaram, within a year or so, the company plans to provide the No. 1 inventory management system in the market. DealerTrack has more than 22,000 subscribing dealers, so officials said their goal is not out of reach.
"Let's get the base technology out there first," O'Neil highlighted, saying that additions will be made to the tool as time progresses.
"We are very confident," Sundaram explained to SubPrime Auto Finance News. "We feel that dealers are going to change the way they execute the used-car business."
DealerTrack Announces Integration with Microsoft's New DMS
At NADA, DealerTrack also announced it has reached agreement with Microsoft for deep integration of DealerTrack's full product suite with Microsoft's new automotive dealer management system which is currently under development.
In addition, officials pointed out that DealerTrack's product suite will function as the standard sales, F&I and compliance modules offered with the new Microsoft DMS. However, consistent with Microsoft and DealerTrack's approach, the DMS platform will be an open environment, so dealers will be able to use other vendors' software solutions if they choose, according to executives.
"We are working with other players to encourage more integration," said O'Neil. "All systems should have open technology. We've tried to hold ourselves out as open is good. We've tried to stand at the pulpit and raise awareness. All the different technologies need to work together."
Richard McLeer, DealerTrack's senior vice president of planning and strategy, explained, "We are very excited about the opportunity to partner with Microsoft, and the advantages we believe our relationship will deliver to our mutual dealer customers. This will be a deep and robust integration that will provide dealer customers with significant benefits.
"This partnership represents a realization of our vision – a single, integrated technology platform offered by a single provider that also facilitates connectivity among dealers, lenders, and other service providers and helps dealers sell more cars more profitably," McLeer added.
John Reed, director of automotive retail solutions at Microsoft, said, "DealerTrack's full suite of sales and F&I solutions across the dealership work flow made them an easy choice as a partner for our new DMS platform.
"At the same time, we, and our development partner, Infonizer, look forward to bringing the auto retailing sector its first truly open technology platform, with deep, seamless integration available to all," Reed continued.
Three Dealer Groups Roll Out DealerTrack eContracting
DealerTrack also announced that three of the nation's auto retailing groups — Sonic Automotive, privately held V.T. Inc. and the Suburban Collection — are implementing the DealerTrack eContracting solution throughout their U.S. dealership networks.
Alan Lehmann, DealerTrack's vice president of finance solutions, said, "We are very pleased to announce that these three premier dealer groups are implementing our eContracting solution.
"Since the product's launch in 2002, more than 210,000 eContracts have been funded, and 20 financing sources are now participating on our platform. EContracting is clearly building momentum in the marketplace as some of the industry's biggest players begin moving aggressively to capture the benefits of improved cash flow through faster funding, reduced document shipping costs, improved compliance and increased customer satisfaction," Lehmann said.
David Plummer, senior vice president and corporate controller for Sonic Automotive, noted, "First and foremost, we are always interested in improving cash flow. DealerTrack's eContracting is helping us fund deals as quickly as the day of delivery to the customer.
"There are also significant benefits for our customers – with eContracting, we can move them through the contracting process easier and faster, and they really love that. We also see benefits from the standpoint of Gramm-Leach-Bliley Act compliance," he added.
Furthermore, Greg Oltman, director of finance for V.T. Inc., which provides consulting services to the Van Tuyl dealerships, said, "Several of our first stores to adopt eContracting have had great success, so we've begun a national roll out."
Citing one example, Oltman said, "One store reduced their contract compliance issues by about 30 percent, and had no returned contracts at all in a recent month – compared with their 9 percent return rate for paper contracts. As we implement DealerTrack's eContracting solution nationwide, the message to our lenders is clear – if you want more deals, get on eContracting, because that's where our business is heading."
Gary Allgeier, director of finance for Suburban Collection, also pointed out, "We and our eContracting finance partners have been enjoying the benefits of eContracting now for about two years. When we talk with new financing sources about becoming a Preferred Lender, eContracting is now a key differentiator.
"If a lender is on eContracting, it tells us that they are aligning their strategies and priorities with ours; that is a meaningful indication that they are a progressive lender," Allgeier said. "When the results are so positive — increased cash flow, reduced contracts in transit and better CSI due to reduced errors — why wouldn't a lender or dealer want those benefits?"
DealerTrack's eContracting solution, which is integrated with the DealerTrack online credit application network, was created to enable dealers to pre-populate, complete and submit retail installment sales contracts electronically to financing sources.
Gilman Joins Board of Directors
Thomas Gilman has been appointed to DealerTrack Holdings' board of directors. He is the founder and chief executive officer of Solutions LLC, a strategic and financial consulting firm that provides advisory services on corporate strategy, acquisitions, and valuation in the automotive sector and other industries.
"We are delighted to welcome Tom to the DealerTrack board," O'Neil noted. "Given his distinguished career within the automotive industry as an operating executive in both the manufacturer and dealership environments, we look forward to Tom's contributions to our board."
Gilman added, "I am proud to have the opportunity to support DealerTrack's growth as a leading technology provider within the automotive retail industry."
For more information, visit www.dealertrack.com.