Posted 9 years ago
“Metrics” and “Actionable Insight” are buzzwords that have been floating around businesses for however many Buy Here, Pay Here operators have yet to ask the questions: ‘What do they mean?’, and ‘Why are they important to me?’
Metrics are accurate measurements of your portfolio performance and provide a basis for improvements. There is a key difference between management ‘reporting’ and metrics. Metrics bridge the gap between standard performance measurements such as units sold, gross sales revenues, net income, etc. and more meaningful, actionable information. They provide key performance indicators and allows you to make immediate business decisions (actionable insight).
For example, in December 2012 you may have had a 47% charge-off rate; but what can you do to reduce it? While knowing your monthly charge-off rate is important, finding what is causing an increase is much more valuable.
Looking at your charge offs as a pool of loans, originated with the same underwriting criteria during the same time period, provides context. Furthermore, it tells you important trend information. You can then make more informed underwriting decisions and changes which may be required. These metrics are the report card which will be used by lenders when you need capital.
Subprime Analytics has developed these portfolio metrics with Static Pool analysis (measures the severity and frequency of losses), Loss / Liquidation (measures the pace of loss occurrences), and portfolio stratifications (“drill downs”) covering virtually every aspect of each deal. This analysis looks at all customer attributes, vehicle types, and all the components of deal structures, including the amount financed, contract term, repayment intervals, payment amount, interest rate, markup, etc.
If you don’t use metrics now, you won’t be borrowing money tomorrow! Subprime Analytics can provide these metrics cost effectively. Call us today for a consultation.