Auto Financing Situation Analysis

As an auto finance executive, you've probably encountered some of the following challenges:

• Your Q3 volume is 20% below plan: Should you change your pricing? If so, what is the appropriate change in buy rates to make up volume without dropping yield?
• Your biggest competitor drops buy rates by 50 basis points: How do you respond and how will your price move impact volumes and yield?
• Your capture rates for some dealers are half of the portfolio average: Should you lower rates for these dealers? If so, what rate change results in a doubling of capture rates?
• A major captive announces 0% for 60-mos financing on all current model year vehicle: How will this impact your volume and yield? Should you change your pricing to respond?

According to a recent survey, over 80% of banks and finance companies recognize that they don't have the data, analysis, and insight to answer these questions. Moving beyond gut feel and oceans of spreadsheets to Profit-based Pricing has allowed innovative banks and finance companies to answer these questions and increase profits by 10-20%.

Why is Profit-Based Pricing a Better Approach?

Innovative Auto Finance businesses are adopting a Profit-based Pricing approach to significantly increase profits, obtain valuable insights into dealer and consumer behavior, and gain a competitive advantage. They have implemented Profit-Based Pricing solutions in 12 weeks, realized 10-20% profit improvements within three months, and have achieved a 10X return on investment (ROI) within a year of use.

Nomis Solutions developed the Nomis Price Optimizer™ for Auto Finance specifically for the unique needs of Auto Finance businesses. By moving from risk-based and market-based pricing to Profit-based Pricing, the Nomis Price Optimizer for Auto Finance helps you maximize profits, while maintaining market share and revenues. It makes strategic use of customer data to optimize pricing by product and customer segment. The solution provides an understanding of how specific customer segments value your various financial products and the optimal rate and price that should be offered.

The Nomis Price Optimizer for Auto Finance enables you to:

• Better Tailor Prices and Maximize Profitability: Leveraging lost quote data, the solution provides a better understanding of consumer price sensitivity. By incorporating business goals, the solution increases profits while maintaining volume and credit quality. Accounting for adverse selection enables the solution to understand the critical interactions between pricing and risk.
• Enhance Dealer Loyalty and Boost Contract Lifetime Profitability: The solution allows you to manage the impact of price on your profitability as well as your dealers' income (reserves). It also manages the impact of price-driven attrition, pre-payment/early settlement, and default ensuring that profit improvements are sustainable over time.
• Better Track and Control Pricing Decisions: Providing an integrated view of the entire pricing process provides the ability to monitor performance, analyze gaps and opportunities for improvement, and learn how the market responds to new rates and prices. Having a record of all pricing decisions and the factors that influenced price provides more control over disparate impact and enables you to better meet regulatory requirements.
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