A revamped dealer grading system is increasing Consumer Portfolio Services’ capture rate, Senior Vice President of Sales Curt Powell told Auto Finance News.
Launched in July, the system enables Irvine, Calif.-based CPS to review and evaluate each of the 10,000 dealerships it works with by grading them on five performance metrics, said Chris Terry, senior vice president of risk management and systems. Those metrics, while proprietary, include factors such as portfolio performance and volume.
“These performance metrics give us a very good picture of which dealers are providing the company with the best business relationship,” Terry said. “As you would guess, it’s a big job objectively managing close to 10,000 dealer relationships. Our sales and origination teams need this data to give us a leg up in a crowded marketplace,” he said.
In fact, the AI-backed system is incorporated into the CPS’ risk pricing model – better performing dealers receive pricing benefits, such as lower fees, lower APRs, and added flexibility on loan structuring. Dealers who score well can save as much as $300 per loan or about 100 basis points off the APR, Powell said, noting that discounts vary based on dealer and loan profiles. Early feedback from dealers has been positive, and CPS has seen an increase in funded loan volume, Powell said. The ratings will be updated quarterly.
The original model, developed in 2017, was “a bit static,” Powell said. “Frankly, it was a bit of an afterthought,” he said. The revised version has more dealer relationship metrics and is integrated with the company’s loan origination model.
