© 2019 United Dealer Solutions LLC.

DEALER CHARGEBACK INFORMATION REPORT

INDUSTRY ANALYSIS AND FIXES

INTRODUCTION

United Dealer Solutions Chargeback Information Report takes a detailed look at dealer chargebacks that stem from automotive lenders who specifically provide automotive financing for the dealer's retail buyers. The data provides insight into why chargebacks happen, how to prevent and fight chargebacks more effectively, how to train your team to process chargebacks, and what might be in store for the future.

 

United Dealer Solutions understands that data analysis is one of the most impactful elements of a successful chargeback management strategy. Understanding Data-Driven analysis allows decision-makers to execute their roles with far better results than practices based upon assumptions. The Dealer Chargeback Information report is designed to help you recognize the value of data analysis and the role it can play in chargeback management.

conclusively, we want to help you create astute, effective strategies that will lead to a compelling improvement to your bottom line.

We hope this resource is valuable to you!

INDUSTRY TRENDS

REPOSSESSION CHARGEBACKS

The finance industry in all its creative solutions to finance just about every type of credit score has in many ways furthered the increasing rise in repossessions throughout the United States. In 2012 the repossession rate was 1.3 million units. By 2017 that number had risen to over 1.8 million units. That is an increase of 38.5% in just five short years. It is expected to see the industry numbers as high as 2.4 million units by the end of 2020, which would be a staggering increase of 85 percent over a decade.

According to various publications, roughly 47% of consumers purchase extended warranties and Gap coverage for their vehicles. This, of course, raises the number of cancellations that must occur following a repossession. Therefore it is extremely important that every dealership understands and has in place a process of validating and correctly canceling the contracts correctly.

According to our source data, many cancellation requests by the lenders to the dealer will be processed incorrectly resulting in overpayment based on bad date cancelation processing. Dealers need to be up to date with proper redemption laws and the effect in has on cancellations. Redemption laws are key in properly assessing the cancellation date. In our assessment of the industry, we have encountered incorrect processing of date cancellations as high as 70% in many franchise dealerships. This simply means the dealer canceled the contract too early resulting in lost revenues from the contract which was originally sold. These errors can be a small as a few dollars to hundreds of dollars depending upon the case.  Over the course of years, they can be a tremendous loss of revenue for the dealership or group.

With creative financing always pushing the envelope which is great for sales we must also balance our processing capabilities to retain dealership earnings for maximum income and growth.

TOTAL LOSS CHARGEBACKS

Reflective of ever-increasing technology sectors that rise within the automotive industry, Vin solutions technology has become a dependent resource for many aspects of the industry. Lenders have now joined the ranks with Vin solutions companies providing data for integrated aspects of the market. In regards to Total Loss Chargebacks, sometimes these third party Vin companies make errors and report a vehicle as a total loss when in actuality the vehicle was never actually totaled.

The effects of these types of errors are staggering. Dealers lose the entire profit margin of contracts attached to these vehicles and often never become aware of the error. It is absolutely imperative that dealerships have a process in place which detects when these errors occur and have a plan in place to challenge these errors when they arise.

With all technology that assists the industry to grow and become ever more profitable, also comes the danger of threat with misinformation. Every dealer should have a cross-check process that verifies the information before canceling. Since a single error could result in the loss of thousands of dollars in retained earnings, dealers must continue to grow with the technology and put in place new processes that will double-check the information.

EQUIPMENT DISCREPANCIES CHARGEBACKS

Vin Solutions companies have also had a staggering effect on the number of Equipment Discrepancy Chargebacks dealers now process. The rise in these types of chargebacks can be as high as 200 to 400 percent depending upon the dealership and the lender. What is even more staggering is the number of dealerships that still have no process in place to correctly deal with these types of chargebacks. Many times we have encountered dealerships that simply respond to scare tactics and really have no process to correctly validate and fight these chargebacks.

Understanding how these chargebacks originate and the technology that created many of them also assists in fighting them. It really is just a matter of understanding the weaknesses of the system, the integrations, and challenging those aspects which do not prove to be factual. It should be noted that this can also be a risky proposition if the person challenging does not have a proper understanding of how to detect the chargeback error and on what points the challenge can actually hold water. Improperly processing these types of chargebacks can bring significant repercussions including loss of lender relationships, lawsuits, and even prosecution.

 

Because of the time, it takes to process these types of chargebacks it is important to have a strong validation system that helps to fight technology with that same technology. when processed in this manner lenders react completely different to normal settlement processes most dealers have in place.