loan servicing software community bank small business

USED VEHICLE VALUATION TIRE-KICKING RULE # 1: DON’T GUESS

The defi Team defi INSIGHT, defi LOS

vehicle valuation

It’s impossible to tell precisely how much a used vehicle is worth without detailed historical data. You can kick the tires or take a peek under the hood, but this only gives you a small fraction of the information you need. For instance, it doesn’t tell you how many people have owned the vehicle or whether the airbags have ever been deployed. These factors can significantly impact a used vehicle valuation.

This is why the #1 rule of valuing a used vehicle is to remove guesswork from the equation entirely. It’s not enough to glance at the miles on the odometer or research the vehicle’s make and model. You must dive deeper, looking closely at the vehicle’s complete history from the time it was driven off the dealer’s lot to the present day. Accurate deal structuring depends on thorough history-adjusted valuations like this.

Why You Need Accurate Used Vehicle Valuations 

The main reason why you should use historical data when performing a used vehicle valuation is because it can affect the loan structure. Even seemingly minor historical incidents impact the value of used vehicles.

Let’s say you want to structure loans for three vehicles of identical make, model, and year:

  • Vehicle 1 has 60,000 miles, no accidents, and has only had one owner. 
  • Vehicle 2 has 60,000 miles, no accidents, and three previous owners. 
  • Vehicle 3 has 60,000 miles, a minor accident, and three previous owners.

If you only look at the make, model, year, and mileage, then these vehicles are identical. However, when you take into account all of the historical data, everything changes.

  • Vehicle 1 is the most valuable because it has never been in an accident and has had the same owner all this time. With this sparkling clean record, you could loan this car to a borrower for hundreds of dollars more than the other two vehicles. 
  • Vehicle 2 is the second most valuable. A higher number of previous owners brings the value down slightly. 
  • Vehicle 3 is the least valuable. A minor accident combined with multiple previous owners will drag the value down by hundreds, perhaps even thousands, of dollars.

By performing this research in advance, you can structure your loans more accurately, right down to the cent. Here are a few other reasons why historical data is important for lenders:

  • You’ll make better decisions. If you have the choice between two nearly identical vehicles, historical data will tell you which vehicle is most valuable or affordable to specific categories of borrowers. 
  • You’ll protect your bottom line. There’s less risk of loaning a vehicle for less than its full value. 
  • You’ll attract more borrowers. When you know precisely what the vehicle valuation is, you can offer the fairest loan possible at a competitive rate. 
  • You’ll have more options for subprime borrowers. Not everyone can afford a loan for a brand new vehicle or one that has never been in an accident. By calculating the exact value of a vehicle that has a complicated history, you can offer an affordable option to a subprime borrower with little risk.

How do you perform a thorough used vehicle valuation quickly and efficiently? Having historical value information available as needed helps.

How to Make More Precise Vehicle Valuations Using Black Book 

Black Book, a used vehicle valuation services provider, offers comprehensive and automated history-adjusted values. On average, these values are 31 percent more accurate compared with traditional used vehicle valuations.

The Black Book system works by calculating an actual dollar value for each of the following factors:

  • Number of previous owners; 
  • Usage type; 
  • Title; 
  • Natural disasters;
  • Accidents; 
  • Damage severity from these incidents; 
  • Airbag deployment;
  • and more.

From here, Black Book automatically generates a VIN-specific value based on the vehicle’s history. There’s zero guesswork involved. Additionally, Black Book can deliver these options to lenders via web-based, mobile, or desktop applications. The provider also offers batch processing for lenders that need multiple vehicles evaluated at once.

When you use Black Book in combination with a modern Loan Origination System (LOS), you’ll make the underwriting process faster, simpler, and more reliable.

Take the Guesswork Out of the Process 

Lenders that use Black Book and an innovative LOS will experience greater operational efficiency at every level. History-adjusted vehicle valuations used to take a considerable amount of time to accomplish manually, which is why so many lenders opted out of it. Now, all of these calculations are done for you in seconds. Automated originations save loan officers time, allowing them to focus on other tasks.

The system will also flag vehicles that require review from an experienced loan officer. If there isn’t enough data or the vehicle doesn’t have a clean title, you can investigate this issue. You’ll focus your attention on tasks that really matter and won’t waste time on tedious routine research.

With help from machine learning algorithms, a modern LOS and Black Book will predict outcomes as well. The system can analyze whether a particular used vehicle will result in a total net loss or gain. Black Book also improves the sales conversion ratio. You can price the vehicle to market during the remarketing process.

If you want a competitive advantage in the auto lending industry, then you should transition to innovative used vehicle valuation software. Embracing this modern technology is your first step to accelerated underwriting.

 

Getting Started

defi SOLUTIONS provides automated loan origination solutions to vehicle lenders. Our modern LOS performs history-adjusted valuations on used vehicles to help offer more attractive loan options to borrowers. To get started, contact our team today or register for a FREE demo of our LOS.

Curious?

Get in touch with us today and get a demo!

REQUEST A DEMO

(Visited 141 times, 1 visits today)