Auto Finance Study Reveals 81% of Leading Finance Organizations Plan to Improve Pricing Process

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BenchMark Consulting International Unveils Results of Pricing Practices Survey Sponsored by Nomis Solutions. The survey captures the pricing practices of the indirect auto financing market and includes 20 of the top 25 lenders. The results revealed that 66% use predictive modeling to help set prices and 81% of participants have plans to improve pricing processes in the next year.

Nomis Solutions, the leader in Profit-based Pricing for banking and finance, and BenchMark Consulting International today disclosed the results of an in-depth Auto Finance Pricing Practices Survey. The survey, available immediately, captures the pricing practices of the indirect auto financing market and includes 20 of the top 25 lenders. The results revealed that 66% use predictive modeling to help set prices and 81% of participants have plans to improve pricing processes in the next year.

Earlier this year, BenchMark interviewed key executives responsible for setting prices of indirect auto loans in North America. BenchMark’s survey sheds light on various pricing approaches in practice today, the factors considered when making pricing decisions, and the growing appetite for a Profit-based Pricing approach in the Auto Finance market.

The survey revealed that the major players in the auto lending industry are trying to achieve different goals and objectives. For example:

  •      automotive manufacturers that offer loans are driven by the “volume” of cars sold more than profit,
  •     national banks are focused on programs that support larger corporate objectives,
  •     regional banks are striving to increase profit, and
  •     sub-prime lenders are focused on risk versus profit

While each organization had different objectives, they share common challenges and all agree that there is room for improvement with their current pricing practices. Two challenges that resonated were the lack of standardized pricing processes and a lack of understanding about dealer price elasticity, resulting in money being left on the table.

Walter Cunningham, director at BenchMark Consulting, said, “Auto Finance lenders recognize that pricing can be used as a strategic lever and that pricing processes can be significantly bolstered to better support the corporate goals of profit and market share growth.”

“Regardless of the type of lender you are and whether you are in the prime market, the sub-prime market or both, gaining a better understanding of your customer – both the borrower and the dealer – and how these customers will respond to your prices is the key to maximizing growth,” said Dr. Robert L. Phillips, Founder and CTO of Nomis Solutions and author of Pricing and Revenue Optimization. “Nomis Solutions’ Auto Finance customers have used the Profit-based Pricing approach to achieve 10-20 basis point profit improvements, obtain valuable customer insight, and gain competitive advantage.”

A free copy of the results of BenchMark Consulting International’s “Auto Financing Industry Pricing Practices Survey Results” is available at the Nomis Solutions’ booth #344 at the Auto Finance Summit, which takes place October 16-18, 2006 in Las Vegas, Nevada. Or, contact Jakki Geiger by email or 650-588-9800 x221.

About BenchMark Consulting International

BenchMark Consulting International has specialized in improving the financial services industry since 1988. The company is a management consulting firm that improves the profitability of its financial services clients through the delivery of management decision making information and change management services to realize the benefits of business process changes. BenchMark Consulting International’s expertise is in the designing, managing and measuring of operational processes.

The firm has worked with 39 of the top 50 (in asset size) commercial banks, all 14 automobile captive finance corporations, several of the largest consumer finance corporations and many regional banks throughout the United States. Internationally, BenchMark Consulting International has worked with the five largest Canadian commercial banks, more than 40 European organizations in 11 different countries, in addition to financial institutions in Latin America, Asia and Australia.

The company is a wholly owned subsidiary of Fidelity National Information Services, Inc. BenchMark has dual headquarters in Atlanta, GA and Munich, Germany. For more information please go to http://www.benchmarkinternational.com.

About Nomis Solutions

Nomis Solutions is the leader in Profit-based Pricing for banking and finance. The award winning Nomis Price OptimizerTM Suite is designed to strategically use pricing to increase profitability while maintaining revenue and market share. Because of the unique needs of each banking and finance business, the suite includes specific solutions for the following: Direct and Indirect Auto Finance, Home Equity Lending, Consumer Lending, Deposits, Mortgage, and Treasury Services. Each solution is implemented in just 10 weeks, provides valuable customer insights, and increases profits by 10-20 % within three months. All Nomis customers have achieved 10 times return on investment (ROI). Headquartered in San Bruno, CA, Nomis Solutions has offices in Charlotte, NC, New York, and London, UK. Visit http://www.nomissolutions.com or call 650-588-9800 for more information.

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