Re-Lease the Data
Fleet monitoring systems were developed to help companies keep tabs on their drivers, and to make sure laws were being followed and vehicles were being maintained. I think the systems could serve another purpose: Flexible auto lease payments.
Auto lease payments are based on what the vehicle is likely to be worth when the lease expires. Based on that residual value, a monthly payment is determined. I remember a joke that a math professor used frequently. He called it “Cook’s Law” in that you knew the answer to the question and then you “cooked” up how you figured it out. Certain assumptions are made when establishing that residual value: the amount of miles that the vehicle will be driven, the manner in which the car will be maintained, and that the vehicle will undergo only normal “wear and tear.” That’s why borrowers are charged extra if they go over their mileage allotment or don’t take adequate care of the vehicle.
What’s to stop a lessor from using a fleet monitoring system to determine how much a borrower should pay every month, based on how many miles the vehicle was driven, the locations it was driven in, and the manner in which the vehicle was maintained? If an auto lessor had that type of information at its fingertips, then it could adjust the residual value on a monthly basis, and adjust the borrower’s monthly payment accordingly. So lessees would be rewarded for taking care of their car. Because let’s face it; in many cases, people treat leased vehicles like rental cars. Which is to say that they don’t treat them well at all.
There are some practical questions in deploying this strategy. Companies with massive lease portfolios face a lot of heavy lifting to implement and maintain this strategy. But it seems that this is a process that can be completely automated using some form of algorithm to determine the monthly payment based on the information downloaded from the vehicle. And it doesn’t seem any more complicated than how mortgage lenders manage adjustable-rate mortgage portfolios.
Technology and data can be great friends to auto lenders. There are many opportunities to take advantage of the massive amounts of data that get created every day to create new products and change the way in which business gets done.
