Used car dealers have shifted to using GPS tracking devices to keep tabs on vehicles over the years, and they’ve come with several benefits, including automated collection and payment reminders for customers, a device provider said. But privacy concerns remain.
Chris Macheca, chief operating officer for PassTime, said the company’s first devices didn’t include GPS. They were more of a clock that reminded customers when their loan payment was due, and if it was “exceedingly overdue,” the device could “prevent the vehicle from starting.”
That was 1997. Fast forward nearly 10 years when GPS technology was added, allowing the devices to locate a vehicle in order to repossess it or to function as an anti-theft device. Over the years, the company has sold more than 2 million such devices, and last year, the company sold more than 300,000, Macheca said. PassTime’s primary customer for the devices is the automobile industry, and industrywide, dealerships have been installing between 1 million and 1.5 million of them annually.
“We have been using the GPS technology for several years now,” said Jeffrey Williams, president and chief financial officer for America’s Car-Mart. “It is pretty much standard practice across the industry.”
When asked how long the dealership has been using the devices, Michael Wyatt, manager of Car-Mart in Little Rock, said since October 2013. Wyatt directed further questions about the devices to the company’s corporate office in Bentonville. Attempts to reach someone at the corporate office for further comment were unsuccessful. Also, attempts to reach another buy here, pay here dealership, Springdale-based Automatic Auto Finance, were unsuccessful.
Yet not all buy here, pay here dealerships use the devices. Daniel Nouguier, general manager of Best Buy Here Pay Here in Springdale, said the dealership doesn’t use them.
“It’s a violation of privacy,” he said.
Nouguier’s background is in the new car business, and new car dealerships such as Fayetteville Auto Park and Adventure Subaru in Fayetteville also don’t use the GPS devices for vehicle tracking.
However, PassTime only works with dealerships that disclose to their customers the devices will be used in cars they purchase, Macheca said. The customer signs a disclosure when the vehicle is purchased. Dealers can use web-based software to track the location of a vehicle.
“It’s important that the consumer knows up front,” he said. “We’re very, very careful on privacy.” As far as the GPS tracking technology, it reports the location of the vehicle it’s installed in “once every few days.”
Macheca said the biggest benefit of the devices is they remind customers to make a payment each month. Dealers have said the biggest return on investment with the devices is the added communication with customers. If a customer falls behind on the car payment and avoids the dealer, the device can prevent the vehicle from starting, leading the customer to call the dealership. This method of automated collection has led to fewer collectors per account, allowing collectors to handle four times more accounts than they could before using the devices, Macheca said.
Also, once the car loan is paid off, the device can be disabled or removed and reused on another vehicle. Some customers like the devices because they offer payment reminders, he said, so they pay to keep them. Other customers have kept them on the vehicle for anti-theft protection to determine the vehicle’s location if it’s stolen.
DEVICE USE HISTORY
In 2013, Car-Mart began equipping the vehicles it sells with the GPS tracking devices. At the time, the technology was widely used among subprime auto finance dealers. The devices cost was about $4 per vehicle per month. While the company didn’t lose many vehicles, the devices would help the company stay in close contact with customers if they were to fall behind on payments. The devices are removed when the loan is repaid.
In the quarter that ended Jan. 31, 2014, the company invested $300,000 toward the GPS tracking devices installed in cars sold. Williams said at the time that the purchase was part of the company’s investment that will pay off over time.
“This is an expense on the front end, but if it helps us track down a borrower when they first become delinquent, we have a better chance to work with them and keep them in the car,” he said previously. “Most of our loans that go delinquent do so in the 11th month of a 28-month contract.”
By the end of fiscal 2014, the company had invested nearly $3 million into GPS technology. After the first quarter of fiscal 2016, which ended July 31, 2015, the company noted disappointment in its collection efforts, and CEO Hank Henderson had said the company anticipated a challenging start in that regard. He also cited several operational inconsistencies, one of which included properly using the GPS technology that had been installed in cars financed by the company. But the company also made several infrastructure investments including the GPS technology, allowing it to support a larger customer base. By the end of fiscal 2016, the company integrated the GPS tracking data into its own database.
USED CAR OUTLOOK
In December, wholesale used vehicle prices increased 0.2%. This increased the Manheim Used Vehicle Value Index to 124.9, a 0.6% decline of from a year ago.
“The most notable aspect of wholesale pricing in recent years has been the stability,” according to Manheim. “In addition to macro-economic and industry factors, this stability has been driven by better, and more efficient, remarketing practices that have enabled commercial consignors to anticipate, respond to, and thus, minimize impending swings in wholesale pricing.”
Through November 2016, used car sales accounted for 30.8% of total sales at the average new car dealership, according to the National Automobile Dealers Association. Used vehicle sales at the dealerships increased 3.4%, and the average used vehicles sale price rose 2% to $19,872.
In 2017, sales volumes are expected to increase at a faster rate than new vehicle sales, according to Manheim.
“Last year, used unit retail sales by dealers grew by more than 4%, their fastest pace of this recovery, while retail new vehicle sales were flat,” he said.
As wholesale supplies increase and auction prices fall, used retail sales are expected to push higher again in 2017. “With proper inventory management, it should produce another record profit year for used vehicle operations.”
While overall wholesale prices have changed 1.2% over the past four years, pricing for different vehicle types has experienced greater change. In this period, prices of pickups have risen 28%, while compact car values declined 14%.
“Blame it on the tremendous consumer preference shift toward crossovers and away from small sedans,” according to Manheim, and that the supply of used compact cars has been greater than demand, “and as a consequence, residuals suffered.”