Consortium Data from Point Predictive Can Transform Lender’s Relationships with Their Dealers

By Daniel Wolford, Fraud Consultant

Building and fostering positive relationships between lenders and the dealerships initiating auto loan applications is one of the most important things a lender can do to ensure long-term success. And it doesn’t just benefit lenders; dealerships too can benefit significantly from positive relationships with lenders.

Strong relationships usually result in more deals from a dealership, and the contracts are generally of higher quality. On the other hand, a poor relationship between a dealer and lender can be a disaster. A poor dealership relationship results in fewer deals for a lender and potentially riskier deals, as most dealers try to avoid sending their less favorable deals to their preferred lenders.

With so much on the line based on the relationship between a dealership and their lenders, how do you identify the true nature of the relationship and manage them accordingly?

The answer lies in data.

Old School Dealer Management May Not Work Anymore – Data Can Reveal Lopsided Relationships

In the past, dealer relationships were managed with in-person meetings and handshakes. This has changed significantly in recent years, and now, data is being used to quantify strong relationships, such as application engagement, capture rate, and consumer portfolio metrics, including credit quality and default rates.

And the data reveals the true value of any relationship. What previously seemed to be a strong relationship can now be exposed as a one-sided relationship with the lender getting the short end of the stick.

The increase in the use of data to manage dealer relationships has allowed lenders to efficiently identify strong relationships to prioritize while identifying weak relationships and the ways to improve them.

If You Want to Quantify The Value Of A Dealer Relationship, You Need to Look Outside The Box

Most metrics lenders use to track and identify the state of dealer relationships are limited to data that only the lender has access to. For many reasons, lenders tend not to share information such as origination numbers, capture rates, and default rates. Some metrics can be calculated through time-intensive means, while other pieces of information rely on truthfulness from the dealership.

But what if you could see funding, approval, capture, and default rates across multiple lenders with which the dealership does business? A dealership may state they send only their best business to you, but what if you could see the average credit score on applications sent to you was 100 points lower than the average credit score for all applications they send to the multiple lenders they work with? Would it change your perception of the relationship and how you manage it?

Or what if you could identify when dealers were sending you an excessive number of loan applications containing fraud or that default without making any payments? Even if it occurred infrequently, if you knew that dealership had a much better track record with another lender, would it change how you manage the relationship?

The fact is external data can absolutely help you gain greater clarity.

DealerCheck™ From Point Predictive Helps You Optimize Your Relationships

DealerCheck gives insight into high-level metrics across all dealerships in the Point Predictive auto lending data consortium. With DealerCheck, you are not only able to track dealer performance with data specific to you, but you can compare it to the overall data for that dealership. Would you change how you perceive a relationship you consider a strong one if you knew your approval rate was 3x the average compared to all lenders, yet your capture rate is 20% of the capture rate for all lenders that the dealer works with, and your early payment default rate is nearly three times higher than the average from the deals they send to all lenders?

Now, DealerCheck can provide these metrics and more, such as individual and consortium level risk scores, total origination and application volume, and the rate at which high-risk employers are used on their applications. With DealerCheck, you can identify high-performing dealers and those you have a positive relationship with and foster the connection between yourself and that dealership.

DealerCheck will also enable you to identify dealerships that are high risk to you or all lenders and either work to improve the relationship or deactivate the dealership to avoid future losses and the other headaches that come with these poor-performing dealerships.

Learn more at https://pointpredictive.com/solutions/automotive-fraud/#dealer-check.