Lenders Lured to GPS, Yet Slow to Invest

As repossessions continue to rise, powersports lenders are looking for ways to help bolster vehicle recoveries. While GPS units are a useful device in auto finance used to assist lenders with the tracking and repossession of cars, the device hasn’t quite caught on in powersports — for many reasons.

With the rise of vehicle theft, Al3rt GPS has been selling more GPS units to dealers, but getting lenders to buy in has been the company’s biggest problem, Tony Tarell, director of sales, told Powersports Finance.

Powersports lenders in the prime or super-prime segment “don’t deal with high-risk customers,” Tarrell said. “So getting them to put a GPS on something when dealing with a 750 Fico or above, is really not worth it to them.”

However, GPS units can prove useful for lenders who make loans in the lower credit bands. Near-prime lender Roadrunner Financial, for example, is eyeing the benefits of GPS units, Chief Executive Jason Guss said. Roadrunner is “investigating” a partnership with Al3rt GPS “to understand the value to the dealer and to the customer — and how it affects our loan performance,” Guss said.

Dealing With the Drawbacks

There are several reasons why lenders shy away from GPS units, including the technology’s effectiveness. CycleOne Financial, for instance, stopped using GPS units on its motorcycles at the end of 2015 once the company started receiving complaints from consumers about their motorcycle batteries dying as a result of the units, Logan Riley, the company’s president, told Powersports Finance.

A few years ago, GPS units did pull a lot of power, Tarell said, but now most powersports GPS units go into a “sleep mode” after 15 minutes of no motion.

Many of CycleOne’s customers even removed the GPS units, voiding the ability for the lender to track the bike in the event of a delinquent borrower, Riley said.

While there are repercussions to consumers for tampering with the device — many lenders automatically put the consumer into default if the device is removed — there is no way to prevent the consumer from tampering, several sources said.

The device is not difficult to remove, said Kevin Carr, vice president of financial services at Passtime GPS. “Making devices near-toimpossible to remove would only make the installation process more difficult,” he said.

The premise behind GPS units is “a sound one,” said Donal Hummer Jr., chief executive and founder of ThunderRoad Financial, but the execution is difficult. “If a customer wants to deactivate it, it would be nothing for them in my mind to do it,” he said.

The best way to help prevent tampering is “complete disclosure” — both written and verbal — to the consumer about the GPS unit, and its purpose, Passtime’s Carr said. MotoLease, for example, has GPS disclaimers in each consumer’s lease package, including that tampering will automatically trigger a default on the loan, Managing Partner Emre Ucer said. Communicating with consumers to make sure they understand the benefits of the device — such as theft recovery — is also a key to prevent tampering, he said.

Beyond the Skip Rate

The “skip rate” — the rate at which lenders cannot locate a unit that is up for repossession — in powersports is as high as 50%, Vijay Patil, chief risk and strategy officer at Yamaha Motor Finance Corp. USA, told Powersports Finance. “In auto finance, the skip rate is about 2% — meaning when you go to repossess 100 units, you can’t find two but you can still locate 98%,” he added.

While there is “a very meaningful benefit of using this technology,” Yamaha hasn’t jumped on board to use GPS units yet because it is “still in a startup mode, so the priority has not been around this mitigation yet,” Patil said.

When the time is right, Yamaha will “definitely look at it on certain products.” That’s because it is useful to know where the bike is located, even if the lender is not able to repossess it, Patil said. “If you know for sure that the bike is at a particular place, you could monitor it and have some luck in repossessing it” down the road, he added.

Many GPS units store data and the unit’s location, meaning anytime a vehicle stops for a couple of hours, it will record that data, Al3rt’s Tarrell added.

While some lenders are steering clear of the GPS units for now, they could switch gears if adequate data is presented to show the device’s effectiveness. “If it’s a way to protect some of my subprime business, which is where you see most of those GPS units being used, that’s what I’d like to see,” ThunderRoad’s Hummer said. “Someone show me the difference between having these on the units or not, with regard to recoveries. That’s really what it’s all about: the outcome.”

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