Depending on the source, somewhere between two to four million drivers are actively driving in the “gig-economy” ridesharing industry in the U.S. – not including self-employed food and package delivery drivers. It’s challenging to obtain an exact count of “gig-drivers” because so many are part-time and jump in and out of the industry. Regardless, the total active gig-economy driver count is estimated to exceed 10 million today and projected to grow about 20% a year.

What do these drivers have in common? 

They are not actively pursued by dealers or manufacturers for their vehicle rental, sales, parts, and service business. Better yet, up to 40% or more of these drivers do not have a qualifying vehicle and need to rent or buy one to participate as a gig-driver.

The good news for dealers?

Dealers are in the best position to serve this industry that’s still in its infancy. Even better, dealers already own the resources to capitalize on these booming mobility opportunities. Who better to have as a customer than someone who needs frequent service and changes cars more often than the traditional customer?

As a former dealer, I know that significant resistance remains with target marketing to gig-economy drivers by dealers. In the early days of rideshare, many drivers were disenfranchised taxi or limo drivers and frankly were not the best custodians of vehicles. Most drivers in the past relied on large fleet owners to maintain cars and had no pride of ownership. Today’s drivers are much more the fabric of society (and some are your neighbors). Gig-drivers need to have a clean and reliable car because it’s “their” business, and they strive to earn high ratings from passengers to get additional benefits and more income.

It’s the Holidays!

These prospective clients offer a tremendous opportunity, especially during the holidays. More drivers are necessary because hailing a car within minutes is at the tip of your fingers with a smartphone, and the holidays only increase demand. From responsible holiday party-goers to shoppers wanting to avoid the hassles of parking in crowded malls, the convenience of ridesharing is appreciated by more riders every day. Another point, gig-economy drivers are making more money right now during the holiday season to invest in their vehicle or a newer vehicle.

So how does a dealer go after this opportunity? 

It’s fairly simple to get started. No additional capital investment is required. Here are some quick tips for a dealer to begin engaging gig-economy drivers:

• Leverage all customer communications, including the dealer website. Dealers should let the market know that they offer special service programs for drivers (coupons, after-hours service, pick up & delivery, etc.).
• Use the words this growing market recognizes. New and used vehicle marketing should specifically mention serving the rideshare and Transportation as a Service (TaaS) industry.
• Partner with turn-key marketplace platforms like HyreCar to rent aged or excess inventory to rideshare and delivery drivers. HyreCar’s platform provides vehicle management, administration, vetted drivers, insurance, and rental payment collection for dealers. And it’s all done digitally. Almost all a dealer needs to do is hand over the keys to the customer.

And what is the long-term benefit for dealers? 

More than 30% of drivers who rent from a dealer will later buy a vehicle from that dealer. It’s a great way to start a relationship with a new type of customer. Another interesting benefit for dealers actively marketing to rideshare drivers is that these drivers become loyal repeat customers. Time is money, especially in the gig-economy, and these drivers need fast turn-around, consistency, and fair prices. Additionally, my experience has shown that when gig-drivers rent or buy a car, the drivers tend to be very flexible. Color, trim, and options are not the primary concern. Vehicle condition, four doors, and availability are key. It’s like owning a restaurant where the patron says, “I like everything!”

Today, rental car companies and third-party repair shops are aggressively seeking these gig-driver opportunities. I believe dealers can serve these customers best. If dealers want to make the holidays and 2020 merrier, I recommend creating a strategy to engage with these incremental opportunities. I strongly believe the future is very bright for dealers that do.

Happy New Year!

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With the end of 2019, we’re saying farewell to a decade of big changes in just about every industry, including auto finance.

One big shift that businesses have made since the dawn of the 2010s is a heightened focus on customer experience.

Statistics leave little doubt that customer experience needs to be a focus for every industry, and auto finance is no exception. Negative customer experiences during the auto finance process contribute to lack of customer loyalty, elevated risk of default, even increased regulatory risk — as well as both short- and long-term ramifications to lender’s bottom line, according to research by PwC and AutoFi.

A new perspective: Preventative servicing

Customer experience isn’t always about what you do — it can also be about what you don’t do. And sometimes it’s not about what customers experience — it’s about what they don’t experience. Often, providing the best experience means anticipating customers’ needs and filling them preemptively, before they ever touch the customer.

I recently heard a term that perfectly describes this perspective — “preventative servicing.” Companies using this approach focus on being proactive rather than reactive. They actively search for hurdles along the sales journey and find ways to help customers avoid problems they’ll never even know about.

I have seen this firsthand in my own company. Adding proactive outbound insurance verification to our tracking and notification process — reaching out to insurance companies for policy information before ever communicating with the borrower, and using AI technology to automatically check the insurance status of new loans — has dramatically reduced the number of borrowers who receive notices. These borrowers have no idea we perform this service, yet it prevents a negative experience.

Anticipating problems minimizes losses 

Another industry example is in collections. Instead of waiting for borrowers to become delinquent, collection departments can use technology to monitor early warning signs that consumers might be having financial trouble, such as paying 20 days late when previously they were paying on time. They might not ordinarily be flagged as “late” because they haven’t hit 30 days — but perhaps reaching out to the borrower to offer solutions could avert a default later on.

Can you think of other areas where preventative servicing could benefit the auto finance world? As the calendar flips to 2020, make it a goal to identify spots in the sales journey that have the potential for customer dissatisfaction. If you can head those problems off at the pass, you’ll get to spend the new decade with less stress and more satisfied customers — and likely a boost to your bottom line.

As VP of finance company markets for State National Companies, Mark Baltuska leverages 25 years of industry experience to work with finance company professionals to understand their portfolio risk challenges and help them find solutions. State National Companies, a division of Markel Corp., is the Customer Experience partner of Auto Finance Excellence (AutoFinanceExcellence.org), a sister service of Auto Finance News.

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Financial Solutions

This year, investors funneled hundreds of millions of dollars into auto finance startups in the U.S. and across the Atlantic Ocean. The investment reinforces the value of — and need for —  innovative companies and fresh fintechs to propel the digital transformation of the auto finance industry. Here are the startups that secured the biggest funding rounds of the year, as reported by Auto Finance News.

Used-car leasing app Fair

Used-car leasing app Fair made waves in the industry this year with the announcement of several funding initiatives that pushed the startup’s total investment to more than $2 billion. The Santa Monica, Calif.-based company is backed by major financial institutions from around the world — Ally Financial, Mizuho Bank and SoftBank, to name a few — and inherited a Ford Motor Credit’s subscription service portfolio, Canvas, in September. Fair secured $600 million of investments this past year – $500 million backed by Mizuho and $100 million from Ally – dubbing it the company with the highest-priced funding.

The startup made an even bigger splash, however, when the company’s former Chief Executive Scott Painter announced a restructuring plan that would cut more than 40% of the startup’s workforce. Among the employees let go was Chief Financial Officer Tyler Painter, while CEO Scott Painter resigned the following week. Adam Hieber, operating partner of Fair investor SoftBank, took over as interim CEO.

Used-car retailer Vroom

Online used-car retailer Vroom secured $254 million in Series H funding, bringing the 6-year-old company’s funding total to $721 million. The e-commerce platform, which ropes in all phases of the vehicle buying and selling process, is partnered with lenders such as, Chase Auto, Capital One Auto Finance, Ally Financial, TD Auto and SunTrust Banks, which provide financing on the platform. Most recently, Vroom expanded its partnership with Chase Auto; the bank will become Vroom’s primary lender with the 2020 launch of Vroom Financial Services Powered by Chase.

Alternative lender Lendbuzz

Direct online auto lender Lendbuzz scored $150 million in debt and equity financing this year. The Boston-based company markets to thin- and no-credit borrowers that are “overlooked by the traditional credit system,” the company noted in a statement. The three-year-old startup leverages machine learning and data analytics to score borrowers who don’t have long credit histories in the U.S.

With the capital, Lendbuzz Chief Executive Amitay Kalmar said the startup will bolster its tech framework and grow the company’s footprint geographically.

U.K.-based marketplaces Cazoo and Motorway

Two London-based auto companies landed millions in funding this year, highlighting the potential for trans-Atlantic collaboration.

Used-car marketplace Cazoo scored $63 million from investors this year in two funding rounds — September’s round brought home $31 million in pre-launch funding, and in December, investors funneled another $32 million when the startup’s launched. Cazoo has raised more than $100 million in total funding.

Meanwhile, Cazoo competitor Motorway raised $13.9 million in a Series A funding round, bringing the company’s total funding to $17.4 million. The online used-car marketplace launched in 2017 and enables U.K. consumers to buy and sell used cars online. Since the beginning of 2018, Motorway has achieved $165 million worth of completed car sales, the company noted.

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11 at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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Average vehicle transaction prices and OEM incentive spending are set to hit record highs in December, leapfrogging highs set last month, according to a joint forecast by J.D. Power and LMC Automotive.

December’s average transaction price for new vehicles is on a pace to hit $34,602, a 1.9% increase from the same prior-year period. The report attributes the growth to increasing prices of vehicles in the truck and SUV segment. Combined with record prices and overall sales, consumers should spend $462 billion on new vehicles in 2019, the report said. By comparison, consumers spent $453 billion on new vehicles last year.

OEM incentive spending per unit is also set to hit a record this month at $4,600, a year-over-year increase of 2.9%. The previous high was $4,520, also set in November. Additionally, incentive spending as a percentage of MSRP is expected to remain at 11%, the highest level since 2008. “Among the 25 top-selling brands in the industry, all but four are expected to show an increase in overall [incentive] spending,” the forecast noted, although did not specify which brands.

Looking forward, “manufacturers will face a lot of pressure to stand out in a crowded market with nearly 60% more redesigned or new entries in 2020 than there were in 2019,” said LMC Automotive’s President of Americas Operations and Global Vehicle Forecasts Jeff Schuster in a statement.

Neither company was available for comment at press time.

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11 at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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Four auto lenders exited the sector this year, pressured by tough market conditions and faltering profits. Three of the four had billion-dollar portfolios, opening the door for some shuffling among top industry players.  

While some lenders quit indirect auto lending — opting to keep originating direct loans — others shut their doors completely.  

Regions Bank  

At the beginning of the year, Regions Bank shuttered its indirect auto lending business, choosing instead to focus on direct loans. The Birmingham, Ala.-based bank informed its dealer network in January of the impending exit and continued to fund loans through April 1. Regions Bank’s portfolio has been declining since 2016, closing out last year with $3.1 billion of loans outstanding. 

Fidelity Bank  

In May, Fidelity Bank exited indirect auto lending after nearly 30 years in the business. Fidelity Bank had been steadily retreating from the auto finance space, withdrawing from 10 states starting in late 2017. “Throughout 2018, we have focused on executing our business strategy to rebalance our loan portfolio with higher-yielding commercial credits and deemphasize indirect auto lending, which is dependent on our growth,” the company stated in a 10-K filing with the Securities and Exchange Commission. The Atlanta-based bank had a $1.6 billion auto loan portfolio at yearend 2018, down from $1.7 billion in the prior year, according to Big Wheels Auto Finance Data. 

SNAAC 

In August, subprime lender Security National Automotive Acceptance Co. stopped purchasing auto contracts and liquidated its portfolio after three decades in operation. “The risk-adjusted returns in today’s market do not meet the thresholds SNAAC had set to ensure profitable and sustained growth which led us to this decision,” the lender told AFN in an email. A few months later, SNAAC transitioned its portfolio to Westlake Financial’s servicing subsidiary, Westlake Portfolio Management. 

Bank of the West 

San Francisco-based Bank of the West closed down its indirect auto lending business in November and subsequently laid off its East Coast sales staff. The bank shuttered its indirect auto lending business to focus on its marine and RV business. Bank of the West’s auto portfolio had been slipping the past two years. Outstandings dropped 6.7% to $4.1 billion at yearend 2018, on the heels of a 19% decline in 2017, according to Big Wheels Auto Finance Data. Bank of the West was ranked 37th in the Big Wheels ranking of the nation’s top 100 financiers. 

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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Throughout this year, more than 20 cases of auto loan fraud in the U.S. have racked up millions of dollars in fake loans and stolen cars.  

The list of lenders nailed by fraud schemes in the past 12 months include Ally Financial; AmeriCredit; Capital One Auto Finance, Navy Federal Credit Union; Pentagon Federal Credit Union, PNC Bank, Santander Consumer USA, USAA Bank; and captives Ford Motor Credit; Hyundai Capital America; and Nissan Motor Acceptance Corp. Independent financiers Exeter Finance, Global Lending Services and Skopos Financial were also victims of auto fraud in the past year. 

Here are the highest-priced fraud schemes of 2019.  

Reagor-Dykes defrauds Ford Credit with floorplan scheme  

So far, 11 Reagor-Dykes Auto Group employees have pleaded guilty this year to their roles in what Ford Credit dubbed “the largest floorplan financing frauds in the history of the U.S.,” according to court documents. The breakdown of the fraud is as follows: 409 vehicles worth $13.8 million were absent from the dealership chain’s inventory; 352 vehicles were sold and funded, totaling $11.6 million; and 37 vehicles worth $1.6 million were “double-floored.” 

The dealership chain is currently awaiting approval from the United States Bankruptcy Court on its $14 million restructuring plan – a proposal Reagor-Dykes hopes will keep some of its locations in operation. GM Financial, another floorplan financier for the Lubbock-based dealer group, is fighting the plan in court, calling it “inadequate.” Meanwhile, the 11 guilty employees await sentencing hearings, which are scheduled for 2020.  

FBI busts Porsche dealer in $3M fraud scheme 

A former dealer for Pompano Beach, Fla.-based Champion Porsche pleaded guilty to a fraud scheme racking up $3 million.  The fraudster, Shiraaz Sookralli, pleaded guilty to conspiracy to commit mail fraud and wire fraud. He faces a maximum sentence of 20 years in prison, according to the U.S. Attorney’s Office of the Southern District of Florida.  

To facilitate the scheme, Sookralli sold non-existent exotic Porsche models to 30 customers. He required the buyers to provide deposits in the form of wire transfers, bank checks and cash that he later deposited into his shell company’s bank account. Sookralli opened the shell company in 2017 with a name similar to the Champion Porsche dealership, for which he worked, in order to trick buyers, according to the Department of Justice’s press release.  

NMAC wins $2.5M in floorplan fraud case 

A federal judge ruled in favor of Nissan Motor Acceptance Corp. after it was determined a used-car dealership defrauded the captive on its floorplan loan by selling vehicles out of trust. 

Helena, Mont.-based Robert Allen Nissan owes NMAC $2.5 million, plus attorneys fees and costs incurred by NMAC to date, according to a Nov. 5 filing with the Helena Division of the U.S. District Court of Montana. According to a Feb. 22 complaint filed by NMAC, the dealership sold vehicles out of trust for months by keeping the proceeds – totaling $795,584 for 25 vehicles – and failing to pay them to NMAC.

FBI arrests fraudsters in $1.7M auto scam 

In August, the Federal Bureau of Investigation arrested six fraudsters for falsely obtaining millions of dollars in auto loans. The scammers operated three fake dealerships — called Premier Luxury Motors, Platinum Motors Auto Sales, and 5-Star Motorsports — which had no employees, inventory, or licenses. 

The perpetrators secured 80 fraudulent auto loans worth $1.7 million, though they attempted to secure $2.7 million in loans, according to the Northern District of Georgia Attorney‘s office. The conspirators applied for auto loans with banks and credit unions, supplementing their applications with fake vehicle purchase orders. Lender-issued loan checks would be deposited into financial accounts opened by the conspirators and held in the names of the fake dealerships. The conspirators would split the money rather than repay the lenders. The scheme spanned about four years, the investigation discovered.  

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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The U.S. Supreme Court has determined that the statute of limitations for offenses against the Fair Debt Collection Practices Act begins when the offense occurs, not when the offense is discovered by the borrower.

Provisions within the law allow borrowers to sue debt collectors for FDCPA infractions within one year of the violation. In the case of Rotkiske v. Klemm, the borrower sued the debt collector in 2015 for improper debt collection practices in 2009 after his mortgage application was denied. The borrower contended that his FDCPA infraction claim was valid because the lawsuit was filed within one year of learning about the violation — also known as a strategy used to extend the statute of limitations by applying the “discovery rule.”

However, in an 8-to-1 decision, the Supreme Court upheld the Third Circuit Court of Appeals‘ finding that the language in the FDCPA was explicitly clear about the statute of limitations: one year from when the infraction occurred.  Borrowers could not apply the discovery rule to extend the statute of limitations unless there was proof that the debt collector purposefully hid the violation.

You can read the Supreme Court’s full opinion, along with Justice Ruth Bader Ginsburg’s dissent, here.

For more content like this, join us at the upcoming Auto Finance Accelerate event, March 9-11, at the Omni San Diego. Combining three crucial topics in auto lending and leasing, Auto Finance Accelerate dives into the strategies and knowledge needed to enhance your company’s auto finance sales, marketing, and innovation. Register before Friday, January 31st to save with early registration rates. Visit www.AutoFinanceAccelerate.com to learn more.

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Financial Solutions

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Financial Solutions