Collateral Protection Using Starter-Interrupt And GPS
With the current economy and the industry-wide spike in delinquencies, many dealers and lenders have looked to Global Positioning Systems (GPS) and starter-interrupt devices to help them manage their portfolio risk. These devices are far from being a panacea—and far from a collections solution “in a box.” This technology, however, taken in tandem with a proven servicing and collection strategy can help dealers and lenders manage risk and improve the overall return on their portfolios. With that in mind, I decided to explore some of the major features and considerations that come into play with this technology.
Technology—GPS allows vehicles to be located online at any time, simplifying collateral recovery, while starter-interrupt allows lenders to disable vehicles in the event of customer delinquency.
Audible tones—Provide payment reminders to customers that their payment date is drawing near or that their payment is late.
Increased customer contact—Some devices require that the customer call in to receive a new start code (once a payment is made) that will allow the vehicle to run until the next payment is due.
Collateral protection—When vehicles are disabled they can be susceptible to damage or impound. Make sure that you have a recovery strategy to deal with this.
Collections strategy—Lenders and owners will find that while the device supplements their operations, the GPS offers no help with actually collecting money. The starter-interrupt feature can be helpful in curing delinquent accounts, but good servicing and collections should start way before the point of disabling vehicles.
Technology Choices—GPS signals can be transmitted and tracked via various protocols and hardware; different devices have different ranges of reception and networks. Explore which one works best for you based on your geography and other preferences.
Installation—A warning to dealers and lenders: Starter-interrupt wiring schematics vary widely from unit to unit. Installs can be tricky for even for the most experienced technician, so make sure that you are working with a vendor that provides support and that you are working with an installer that has equal measures of patience and persistence.
Subprime auto businesses grew and flourished long before the advent of GPS/starter-interrupt technologies. This technology can help mitigate delinquency and default risk when it supplements world-class collections operations. At end of the day, however, these units will help you protect your down-side but they will not supplant the need to do the things that build and retain satisfied customers, referrals, and repeat business!
Joel Kennedy is EVP/COO and cofounder of Pelican Resource Group, LLC (www.pelicanresourcegroup.com), an innovative lending and servicing partner currently operating in the Mid-Atlantic region. For more information please call 866-989-9688 x702.