SPEAKERS
Brian Clegg, Rich Alterman

Rich Alterman  00:04
You're syncing up and tuning in to The Lending Link Podcast, powered by GDS Link, where the modern day lender can dive deeper into the future of Data Decisioning and Credit Risk Solutions. Welcome to the show everyone. I'm your host Rich Alterman, and today we're syncing up with Brian Clegg, Senior Lender Solutions Manager at Black Book, where he has worked for more than 11 years. In his role at Black Book, Brian consults with auto finance lenders across the US and Canada, and how to best leverage Black Book vast datasets to reduce risk and increase profitability throughout the loan lifecycle. Brian was recognized as a 2018 auto remarketer 40 under 40 honoree. Black Book family of vehicle appraisal guides in the United States, which provides vehicle pricing data is published by National Auto Research, a division of Hearst Communications. New and used car dealers, lenders, manufacturers, fleet remarketers and government agencies have used Black Book since 1955. Black Book provides value for both new and used vehicles including cars, light trucks, and collectible vehicles produced since 1946, and motorcycles, ATVs, snowmobiles, personal watercraft, and heavy duty commercial trucks and trailers. Other products include vehicle identification number or VIN decoding software, projected residual values, inventory management tools, and lead generation applications. In this episode, Brian will touch on key trends impacting vehicle values. Some key statistics on auto lending, potential impacts of shifting views towards car ownership, and so much more. But before we dive into the interview, please head over to our LinkedIn and Twitter pages at GDS Link. That's G D S L I N K and hit those like and follow buttons. If you have not done so already, please subscribe to our podcast on Apple podcast, Spotify, or wherever you prefer to listen to your podcast. All right, now let's get synced with GDS Link. Welcome, Brian. I hope you have a great week so far. Thanks for participating in our podcast. Where are you joining us from?

Brian Clegg  02:04
I'm joining today in the suburbs of Metro Atlanta reporting live from my office and work remote a few days a week. But thank you for having me. It's an honor and a pleasure. And I'm looking forward to sharing information about Black Book and market trends that we're that we're seeing.

Rich Alterman  02:21
Great. Well, thanks for joining again. So Brian, you've been with Black Book for over 11 years. Can you please share a bit on your background before joining Black Book? And what was the road that took you there? Pun intended.

Brian Clegg  02:31
So yeah, it was it wasn't a kind of a curvy road getting to Black Book. I started out right out of college, went to work for Wells Fargo as an entry level credit manager with a focus on consumer lending, which was unsecured loans, auto loans, real estate loans, and then worked my way up into management and was there for five or six years, man was really in the day to day operations of looking loans and understanding the whole finance process. And then 2008, 2009 we had a great recession. That was the merger with Wachovia, Wells Fargo, and part of the department I was in, disappeared. And I went to the bank for a little while and went to look for a consulting job with Wells Fargo home mortgage. And the person I had reported to previously at Wells Fargo, it was not Black Book. So I gave him a call and said, Hey, we're getting deep in the interview process. I'd love for you to be a reference for this, this new position I'm applying for. And a few days later, he called me up and said, Hey, Brian, you know, I know you're like you're looking for something new. I don't want to take you away from it. But at that time, Black Book was headquartered in Gainesville, Georgia. And he said, you know, come up to Gainesville with an open mind. And that's where it all started.

Rich Alterman  03:44
Great. And here you are 11 years later, obviously it's been a good decision. Good decision. So yeah, thanks for sharing that. And I always like to get a little personal before we dig into the to the business side of things. So I understand that you enjoy coaching sports. What do you coach today?

Brian Clegg  04:00
Well, I currently I'm not coaching, I'm taking a little break. But previously I coached multiple seasons of flag football and T ball and soccer with my son. And now he's moved into full contact tackle football, and it's been really fun. So I'm kind of on the sidelines. For now. We're gonna see how it goes. And after the season, I may come back, but I'm just kind of filling out the league and everything for right now. But it's it's been a lot of fun.

Rich Alterman  04:28
As you think about being a coach and coaching children, you know, what are some of the life lessons you want them to take away from? Being in team sports?

Brian Clegg  04:36
You know, I think it's, you know, adversity, getting out there when it's hot. But what I tell my son is really just two things to focus on is one, do your best, and two, listen to your coach. If you're doing your best and you're listening to your coach, good things are going to happen for you. And one thing I really loved while coaching, we would have some kids that had different talent levels than others. And what I'd love is when all of a sudden they get it and they blossom and you see some of your less talented players just do great. And as a coach there is no better feeling in the world to see that and it's just a ton of fun.

Rich Alterman  05:09
Thanks for sharing that. Okay, so let's get down to business. So before we start I, I wanted to share some stats that I read the other day, Experian put out their state of the automotive finance market for q1 2022 versus q1 2023. And just thought, you know, some of these highlights were interesting. Number one, according to the recent report, the average car payment for new vehicles was a record high at $725. In the first quarter of 2023, 11,5% increase from the first quarter of 2022 to 725 bucks wow. The average car payment for leased vehicles increased at a comparable 11.2%. However, the increase in the average car payment for used vehicles was just 2.2%. Auto loan debt is the third largest debt category behind mortgages and student loans. Overall, Americans owe 1.5 6 trillion in auto loan debt. According to the Federal Reserve Bank of New York, accounting for 9.2% of American consumer debt, and many Americans are taking many years to pay back their auto loans. The average auto loan term now is 68.6 months for new cars, 67.4 months for used cars, and 35.3 months for leased vehicles according to Experian. I also read which was interesting that five years ago, there were about a dozen models and new cars that sold for less than $20,000. In 2023, there was only one, the Spartan Mitsubishi Mirage hatchback, which accounted for about 5300 of the 7.7 million new vehicles sold in the US in the first half of 2023. Pretty interesting stats. I think about the last podcast I did we with Kevin Moss, and we talked about some of the stats going on with the national debt, consumer debt, which continues to grow, as we all know. And most recently, of course, we heard that the federal guaranteed student loan program, which has been payments have been paused, are supposed to resume in September, October, although I did see on the news last night that President Biden is looking for some new approach. But you know, when you think about those high car payments, you think about the high rental payments. And now you think about the you know, the student loan debt coming back in it's, it's hard to think through how people are going to really manage their way through those increased costs. So let's start off with having you provide a high level overview of Black Book. And the type of clients that you particularly focus on in your role with the company.

Brian Clegg  07:26
Oh, sure. So I know you mentioned earlier, you know, Black Book has been around since the 1950s. Our core product, of course, is going to be vehicle values. And so we we archive our data, what they were in the past, of course, what the vehicle is worth today. And then we forecast what the vehicles will be worth into the future. That's our core product. And we have over 500 data points per VIN number. So it's not just vehicle values, we have all kinds of specs on the vehicles. And then outside of that we'll talk about later. There's other other data sources that we're gonna be putting out into the market that that people will see, we're starting to license out some of our own internal data. But as far as my role is very unique, I would say. And it really it is a lot of fun. I work primarily with financial institutions, East Coast to West Coast probably say 85% of my time is spent with different financial institutions through different credit spectrums. You know, I may have a phone call with a large bank, and then hop off and I'm talking to a medium sized credit union, then I get on another call, and I'm talking to a credit bureau. And then I'm talking to a loan origination system. That's what we call a value added reseller of our data. You know that a lot of times you sometimes they utilize, of course, a GDS Link interface that's, that's currently available, and then may go from there and talk to accounting firm, or an investment group in New York City or an insurance company or sometimes even a state agency that does things like ad valorem tax on your, on your vehicles. So it's, you know, it's a very diverse role. And I'm working with anything through looking through our data and explaining what's available, how it's worked methodologies, and how it's derived and how we deliver that to contract negotiation. And just everyday, you know, service that our clients need some kind of the main point for most of our customers and then we we have an automotive side that focuses more on dealer groups, and DMS software and Lead Gen companies with automotive space. But that's a pretty high level view of what my role looks like.

Rich Alterman  09:27
Sounds really interesting and diverse. So I know it's been a while but back in 2014, Black Book, became more aggressive on the analytic side of his business, hiring his first EVP of analytics friend of both of ours, Anil Goyal, who's now president of Corserv. Can you share what was the catalyst behind this decision? And, you know, maybe some of the key benefits is brought to both Black Book your customers.

Brian Clegg  09:48
A lot of this kind of derived probably say, 2009 when the great recession hit, and what we saw was just a huge influx of financial institutions come In a Black Book, so when a lot of the lenders were burned on deals, of course, they wanted to blame it on to the vehicle values that were used. So we saw just a huge spike in interest where a lot of times we were more focused on the dealership side. And at the same time as you've imagined, in the financial world, they have their own set of data science teams, and they have their own statisticians. So we had to put some more some more layers behind our data. And so we O'Neill came in and was, he did a wonderful job and created our our data science team, which was persisted mostly a data science. PhD statisticians, just a group of very, very bright, I sometimes call them smarty pants. Very smart people, I, you know, I walk into their office and they have a whiteboard. And it looks like hieroglyphics, with all this different formulas. Just a great group. And we continue to add to our team. And a big piece of that is, is we're not just a Book company anymore. Our data science team helps us with our forecasted values to be more precise, many new data enhancements that we're we've rolled out. And then more recently, we've been working with a lot of the manufacturers, and we do consulting and custom studies. Those things can be maybe the EV market, we've got a lot of new players and new manufacturers coming out. They expect to be doing a lot of leasing on these higher higher cost vehicles. And they need to know what they expect these vehicles to be worth in the future. They have their own predictions, but they come to Black Book to have a totally independent, unbiased prediction. And it's not just only EV, we have manufacturers that we may do a recession study, what if what if we have a recession? What is the life expectancy, or maybe they're coming out with a brand new vehicle, and they want Black Book to give them advice on content? And what how it should be built, how it compares to their competitors. So multiple is really an open book with what happened our data science team,

Rich Alterman  09:57
Let's talk for a few minutes about used car prices, both, you know where they are today. But almost, if not more importantly, you know, we went we went through a period. And I think we're kind of out of it now. But were used car prices were an absolutely going through the roof. Can you share a little bit, you know, kind of looking back on, you know, what were some of the real causes of that. And then in line with that, what are the trends that we're seeing now as far as used car prices versus new car prices.

Brian Clegg  12:28
So we've had a historical market the past three years, if you want to look in the past first, traditionally, used car prices are gonna depreciate around 13.5% year over a year. So that's roughly say 1%, 1.5% per month. That's what we've always typically seen there were there some years it may be 17%, or 16%, or 12%, but usually about 13.5% is what you expect. We had the pandemic that occurred, they plummeted shortly. And then of course, they exploded. 2020, year over year depreciation was only 2%. And so that was just unheard of. Then we got into 2021. There wasn't there was not any depreciation, there were appreciation of 28.7%. So unheard of, appreciation of almost 30% on used cars to the six year old vehicles. Now we get into last year, we had a large depreciation but you got to keep in mind we were coming off of historical highs, there still wasn't really much if you if you look at it coming off of a high, but 2022 year over year, it was 22.9% year over year depreciation going into 2023. You know, we're getting towards the end, we're expecting about 18% year over year depreciation, which is still high above that 13.5% percent that we typically would see. But we're still coming off historical highs. As far as what caused this. Mostly it's going to go straight to supply and demand and inventory. You know, when we had lockdowns people, you know, and had money from all this government money pumped into the into the economy. People were ready to buy cars and were ready to go places. The problem was, there was many cars out there for them to purchase. Manufacturers canceled their ship purchases. And then there was a big chip shortage which led to no new cars available, no new inventory. You also had rental car companies, the fleet because no one was traveling. And so basically, it all came down to inventory levels and the demand was high and supply was low. Used cars. You know, there's not a used car factory. Where used cars come from are a couple of main sources. One is going to be trade-ins. So when you go to purchase a new car, you trade in your car and there's a used car for someone else to purchase. Well, there were no new cars therefore no trade-ins. The second major source are going to be rental cars. So a lot of times real cars, defleetdefleet that floods the market with three year old vehicles, well, they already defleeted. So there were no rental cars in the market. That's another source of inventory. And then going into the future as well, I'm sorry, then you also have lease returns. That's another big major source. So lease leases are basically calculated trade-ins that are going to come back typically say 36 months from lease origination. Well, the values were so high compared to the residuals that were forecasted on these leases, the customers opt to purchase the vehicle, and a lot of times they would purchase it their lease and flip it. So there were no use cars.

Rich Alterman  15:44
So let me ask the question, when there's still a lot of debate going on in the market, we're seeing different companies are adopting different policies. As far as working from home, you're working from home right now. I'm working from home right now, I see that while some companies may, I think, try to move to a pure at work policy, in the office policy, I think that as, certainly the younger generation likes this flexibility. So I think there's going to be more of a hybrid type model that we see out there. Do you see that impacting car ownership, you know, more and more people working from home, and maybe questioning, why do I need to have a, you know, a car sitting in my driveway, about three days a week.

Brian Clegg  16:21
I really don't see it impacting. This is just my opinion, people still like their, Americans love their cars. Yeah. They want to go on vacation, it's just part of our society and our culture, if you are going to have those urban, probably millennial, younger generation, they may not already have a car anyway. And they probably don't leave, you know, a three mile radius, and they're going to be using Ubers. But in the suburbs, and more rural areas, you know, they're gonna have their cars.

Rich Alterman  16:49
So in line with that, you know, I was reading about trends around car ownership. And you mentioned Uber, so you got rideshare vehicles, Lyft and Uber, we have subscription ownership, companies like Zipcar, where people basically are renting the car for a day or a couple of hours even. And then the latest trend I was reading about is called shared ownership, where multiple customers actually are making payments on the same car. And when I think about car values, I think about, you know, one of the most obvious is the the high mileage, right, the more mileage the less value the car is. But I was just curious whether you guys have a way that you're able to detect the actual ownership model of a vehicle. And is there some impact that if you have a car that's being driven by, you know, five different people during the course of a year that that's going to result in a more rapid depreciation.

Brian Clegg  17:41
So we do have a way to notate the vehicle itself, we've moved into what we call a VIN specific value. So back in the 1950s 60s 70s 80s, there was a Black Book pre internet. And if, if it's a three year old, Rav4 with 30,000 miles, XLE with leather seats, that's the value. And that's the value for every every one of them in the US based on the guidebook. But we moved, like I mentioned to the event specific value, and there's a couple things that we're doing. But mostly in particular, we look at the history of that particular vehicle. So we're not just looking at say that Rav, two year old Rav4, with 30,000 miles, we're looking at Rich's Rav4 sitting in his driveway. And we know that Rich's vehicle was certified pre owned, you know, two months ago. And we know that he's only the second owner, or I'm sorry, yeah, he's only the second owner of the vehicle. We know there is perfect service records, no incidents. So that's going to add value to the vehicle. And a lot of this derives from the consumer with a CARFAX reports and vehicle history reports where you pay up more if you have a super clean car. Now, we're not looking at say is it a ride share, or if it's not a ride, share, but if it is a ride share, it's going to be reflected in the mileage. And so when you pass us in that mileage, we'll be able to, of course, adjust for those higher mileage vehicles. And we will adjust the value for number of owners. But more in particular, is going to be major incidents like wrecks, salvage title, frame damage reported at auction. So that's kind of what's going on at Black Book to address some of those.

Rich Alterman  19:18
Yeah, it will be interesting, though, if we do move to a model where multiple people are making payments and using the same car, right, that how you detect that and I just got to believe that. I mean, people are very different driving behavior.

Brian Clegg  19:31
I think it would affect insurance, too. Yeah. How does an insurance company tackle that if you got one? One person that's 20 years old, it's, you know, had two speeding tickets versus the other owner is 26 and a perfect driving record. Have you hadn't charged for rate? How do you know when I think there's a lot of questions around that.

Rich Alterman  19:48
Yeah, that'd be even reporting to the credit bureaus. Let's kind of talk about our topic that you can't avoid nowadays with the auto industry and that's electric vehicles. So we're seeing obviously more and more regular nation's mandating, we're proposing the elimination the production of combustion engines by a certain year some as early as 2030. Many agree we are far off from having the infrastructure that can support a rapidly growing presence of all electric vehicles. Case in point I came across this according to the J.D. Power survey customer satisfaction with public electric vehicle charging infrastructures continues to decline satisfaction with public level two charging decreased 16 points year over year from 633 to 617, on a 1000 point scale, so it wasn't that high to begin with. Customer satisfaction with direct current fast chargers dropped even more, declining from 674 to 654. In the last year. And then conclusion is that a lack of adequate public charging infrastructure could slow consumer adoption of EVs. Nevertheless, the handwriting is on the wall and it's hard to envision any reverse of this trend. Thinking about core values, at what point do you predict we'll start seeing a fall off in the value of combustion engine cars, and you know, how substantial could that be?

Brian Clegg  21:00
So I don't see that happening anytime soon. Gas vehicles, Diesel vehicles, they're not going anywhere, anytime soon. If you watch the Superbowl ads, you would think that everybody, six months from now, we're going to be driving an EV. And they're gonna be plugged plugged into it. Just like you mentioned. The infrastructure is not there. Consumer appetite is not quite there either. You know, I looked at some of our data. And let me just pause. What if, what if everybody today said hey, I'm gonna move electric, I'm gonna go buy an electric car. Today, I'm getting rid of it. Well, the inventory is not there one. As new cars for sale, think as of yesterday, it was around 2.3 million new cars listed in the market for sale, out of that 2.3 million that was only around 177,000 EVs available. So it's not even there if you want it to. And then on the used side is around 2.2 million used cars listed out there for sale. There's only 153,000 of them out there. And like you mentioned, the infrastructure is not there. The charging stations not working, having to wait for them to work. I saw an article about Ford CEO trying to do a road trip in a F 150 Lightning and he was awakened about how long it took him to get from I want to say California and Las Vegas. But then you also got to think about when I talk about infrastructure, there's other things that are, other information I've looked at, and found, or certain things about the vehicles. One, I don't think people realize how heavy they are. They're much heavier than your ice vehicles. So with that said, think about a bridge. Maybe it was built 60 years ago, I'm sorry, 160 years ago, and you've got these unbelievably heavy vehicles on these bridges. The infrastructure is not even there on some of the roads for these vehicles even tell him, you know, if you've got a car holder, they can't carry as much of a load with, as they can have to used car light trucks, but you typically used car light trucks. Then you look at power grids. Okay, we've got a heat wave going on right now. You got places in California and Ohio that are, you know, they can't keep up with just running the air conditioners. How do they expect that to occur if everybody's got their vehicles charged in, and then didn't even talk about on the charging stations, cause there's also issues that have been reported with theft, just like you would have people that would steal the copper out of your air conditioner. These are understanding that there's precious minerals inside of these chargers to go in there and steal those I'm still inside. So. I've been another thing that's probably not talked about as much is going to be what happens when there's an accident, and these vehicles catch on fire. Typically, one fire truck is going to be able to take out a combustion engine vehicle fire. They're taking six fire trucks out and you still can't get it out. Or if they think that they got it got the fire under control. It's coming back to life. So it's just not there yet. Trying to get there. But there's also some consumer demand on there with, say, the towing piece, you know, if you buy a pickup truck, you're going to want to likely tow a camper, you're going to want tow a boat or motorcycle or some of your toys. Well what people may not realize is that, it deeply takes away the range, when these heavy loads, you may get half the range. So there's just a lot out there right now.

Rich Alterman  24:10
And there's a lot left to do to make it really something we can shift to but that said I still I still envision a day where and a question for you is, there's that tipping point, right? Where people like to see being concerned and saying, Hmm, I'm gonna go out and buy a car today. I'm getting closer and closer to these, these mandates, these dates. So I really want a combustion engine, but maybe I should lease it instead of purchasing it because I'm probably going to get rid of it maybe and shift to an EV sooner rather than later if that makes sense.

Brian Clegg  24:13
One of the most successful car manufacturers out there is Toyota, of course, and I've noticed that they've been less aggressive on the EV push, they're more leaning on hybrid, they're not jumping all in saying hey, we're gonna convert all of our vehicles to electric by X year. So I think there's still more work to be done. I mean, me, personally, the hybrids is the way to go. But I'm also seeing that they're looking at a hydrogen engine development, which could be sustainable. So I think those are just things to watch. I think, as a consumer, you got to be a little bit concerned what if you know what you buy today becomes obsolete in two years?

Rich Alterman  25:16
Yeah, I was reading that there are some predictions in the auto industry going on right now that we're actually getting ready to face a potential oversupply, due to robust production married with purchasing challenges due to higher average car prices, higher interest rates, many predicting a price war on the horizon, and some saying that it could be significant. You know, it's interesting, I live not not that far from a Tesla dealership, we know that Tesla recently reduced the price, I think, like 10 grand on two of its models, I feel sorry for people that bought those cars a year ago, but it's interesting, I live not too far from a Tesla dealership, and there seems to be this, I'll see these trucks pull up with all these Tesla's not too far from where I live. And there's like this overflow lot of Tesla cars, and there must be 200 cars in that lot at or three miles from the Tesla dealership, which has another, you know, 100 cars and a lot. So, you know, what's your feeling about? Is there oversupply coming? And what what's that going to do to prices?

Brian Clegg  26:15
Well, just like you mentioned, they slashed prices overnight. And then we saw the same thing with the Ford, you know, Ford F150 lightning, almost the same exact thing. So that does impact a lot of different things. Even as a valuation guy that impacts our forecast on the values and impacts, you know, we have to make changes almost overnight to these values. When this occurs. The EVs, if you think about it, it's just a battery, and wheels, you know, there's not a transmission per se, there's not a engine, so they're easy to build, there's not that many parts to it. So I think that's part of the to do this is easier and quicker to build. I think you may see in the dealer world, they may have a tougher time selling them, you know, pitching them, and may lean towards putting the customer into an ICE vehicle. And then we talk about, if you're a consumer as well, and you'd like to go on a road trip, you're probably not going to want to have to do the charging piece. If you're if you have a decent traveler now, you know, I'm for EVs. I think they're great product, you know, I think you just let the market determine what people want. And eventually, that's where it'll go. It's all gonna be determined on consumer demand.

Rich Alterman  27:28
Right, right. So not around maybe some of the trends that were going on in the auto industry. Today, I read a report I was wanting to get your thoughts on, it was back from 2020. And it was published by the Insurance Auto Auction company. And it talked about negative equity in cars. And, you know, it highlighted several factors. And once again, this is back from April 2020. But I think some of the things probably are still there. It said that they estimated that nearly 5 million cars are declared a total loss each year and 60-70% of those totaled vehicles still have loans. And therefore they face a negative equity situation. Instead, it highlights several factors that are combining to create negative equity, the increasing cost of new vehicles and the ever growing consumer demand for high value vehicles such as EVs, the elevated levels of appreciation with new vehicles this back once again in 2020, losing up to 20% of their value in the first year alone. And as we talked about earlier, the increasing longer time on loan terms, many 84 months that often outlive the average vehicle warranty. And of course, it says today's environment of rising cost of borrowing. So all those things, even though this article is from April 2020, I could change it, call it August 2023. It seems so can you talk a little bit about this, this concept of negative equity, and how does that maybe impact some of the trending data that you're seeing and what not?

Brian Clegg  28:50
Yeah, so I mean, I think part of that negative equity trend, you need to look at long term, I'll remember whenever I was doing loans back in 2006-2005, you know, 60 months was kind of a stretch back then. Now we're seeing 72 - 84 months. So when you have that long amortization period, that balance takes a good while to get, you know, to get into a position of equity. So that's, that's one piece of the equation there. Okay. Another piece is going to be the timing of that loan. When was that loan booked? You can, look at our Black Book index, you can see it online if you go to blackbook.com and market insights. And we update index publicly every month. But if you look at that, you know, steady, pretty much from say, July 2011. All the way to say October I'm sorry, until the beginning of the pandemic, okay. So you had that problem there because of the loan terms and the balance coming down so much slower than normal. That's one piece of it. But another thing that's very important is when did you book that loan? Okay. If you booked it in, say, April of 2020, we saw the values come down very, very sharply for a brief period. So that same car was actually worth a whole lot more a year later, a year and a half later, as the values appreciated like they did at that point. Now, if you booked that loan at the peak, those if you have a portfolio, those are the ones you really need to focus on, you know, and there's multiple ways to do that. But basically keeping a pulse on that equity position. And working with those customers, if it's a loan amendments, if it's rewrites, whatever you got to do, you don't want to take that loss. But I think that's, that's the main vehicles, you really want to focus, I probably say anything both in between January, I'd say probably October 21, until probably October 22, that's when you're going to see probably your highest negative equity positions. But I will mention one piece about that, too. At the same time, it was a new car, they were bringing in a trade-in, and that trade-in was bringing in a lot of money too. So that kind of helped offset some of this.

Rich Alterman  31:06
Interesting. So you mentioned at the beginning that we're integrated partners with the guys at GDS link, thinking about the pandemic, going back a little bit. And wondering whether you all saw an increase in the use of the data and your solutions in the underwriting process. Did you see some spikes during the pandemic and have they continued post pandemic.

Brian Clegg  31:26
So one thing that we did see, of course, is the further digitization on the lending across many verticals, trying to do basically almost like a Carvana. You know, you can go online, apply, submit your information and have a car delivered to your door. And trying to make that not going to the dealership, you know those types of, those types of things accelerate. What we saw some with is some of our way our data is being used. And then some of the, some of the products and enhancements that we, that we put out. There are some things that are pretty simple. But you know, whenever you go to purchase a vehicle you're trade-in is a big piece of that equation, right how much you're going to get for your trade-in. So customers want to know quickly, you know what that is what that number will be. And when you go online, they want an accurate trade-in. And so one thing we did is we work with the DMVs, and we have a license plate to VIN decoder. So instead of having to put in your full 17 digit VIN number, somebody can be online and just type in their their license plate and their state, and basically brings back event for us to give them a correct trade-in value. So we saw increased integrations there. And then more recently Black Book has worked with KAR which is an auction group and BacklotCars for what we call a guaranteed offer. And with guaranteed offer, you go in, you've put in your license plate or your VIN number, and you ask specific questions about your vehicle. It's usually three or four questions, you know, like, do you have all your key fobs? Do you have any scratches, just a few specific questions. And then in a matter, we tried to make this process less than five minutes, and you receive a competitive offer for your vehicle. And that can be, some people are purchasing the vehicles to have inventory when we were low on inventory. But it gives that consumer a guaranteed number they can walk into a dealership with we partnered with Car Bravo, which is a platform for from GM. And it's taken off, it's slowly growing, because it's trying to streamline that process. You know, they don't want to go to one risk website and get a trade-in value, then go to another and then come into a dealership. And it's totally different than what they had online. So it's just more transparency and making the process just faster for the consumer because that's what they're demanding.

Rich Alterman  33:43
With their product have a specific name?

Brian Clegg  33:45
It's through right now through a platform called Car Bravo. Okay. And that's, it's basically GMs kind of online marketplace. Yeah, for them. You know, it's neat, though, because we're not only doing GM vehicles, we're doing all kinds of different vehicles outside of their their vehicle set. So it's a, and it's really cool. So if the dealer signed up for that service, and you get that guaranteed offer, the dealer has kind of dibs first on on that. So if they want to honor that guaranteed offer, they can if they don't want to, that's okay. The process goes along, the customer doesn't even know it. Then the next day BacklotCars cars comes, picks up the car and cuts a check to the dealer and then takes that vehicle to the auction sales. And there's other offers out there with with some of our competitors, but the differences is ours is much more competitive. It's not a lowball offer that you might see.

Rich Alterman  34:35
So you know, one of the things that we promote at GDS is the use of our software Modellica across a full credit lifecycle, originations, account monitoring and collections. I think you touched on it a little bit, but maybe get a little more deep in how your data might be used for portfolio valuations and also maybe in collections.

Brian Clegg  34:51
You know, traditionally, most financial institutions would just look at a vehicle value at loan application to determine an advance amount and then they may not ever look at it again, until this deep deep state collections are even at what we call remarketing where they have to liquidate the asset at the auction. So that was kind of your traditional touch points only. So now we're, over the years is as we have much more data centric teams across the US, we're being plugged in and multiple different what we call use cases. So pre origination before they even do the application, risk teams will develop models or scorecards, and what they look at is the historical and/or forecasted depreciation patterns of different vehicles. So just like you have a 850 credit score, maybe a great A, maybe a 620 as a C, a similar concept, but instead of credit risk grading is collateral risk grading. So they may look at say, a Toyota Tacoma, that holds this value quite well, and grade that vehicle as a grade A or grade 1. And then on the other side, there could be a Dodge Durango that drops like a rock, but they put that as a C grade vehicle. So they'll build these out behind the scenes and may determined to advance higher LTVs or go different terms based on the riskiness of the vehicle. But then once they book the loan is active loan and in the portfolio, and it's a funded loan, every month or every quarter, they'll go in and refresh the values on the portfolio. And then they take that output data and use it for internal, internal reporting to understand exposures for their last forecasting, and then also in their collections. So if you got your 30/60 day late accounts, if you want to count is upside down $10,000 versus one as positive equity of $5,000. It needs to be collected differently. And they use that data to determine different buckets for collections. And then of course, in the remarketing piece, they look at the Black Book values and determine how much they expect to set as a floor at the auctions if they can liquidate the vehicle. But then even before the loan application, those also were used in marketing, they'll take some of that output data and look at positive equity customers. And they may offer a restructure or even a cash out ReFi. And that's kind of where we plug in all throughout the loan lifecycle.

Rich Alterman  37:18
Great, well, I appreciate that. So we've touched on a lot. And, you know, keep an eye on a time here. Gonna give me an opportunity to share if there's any additional trends that you've seen that you think would be interesting in our, to our audience, to our listeners today that we haven't touched on. Before I wrap up anything, Brian, that you'd like to touch on.

Brian Clegg  37:37
So as far as you know, some trends that we're seeing here lately, like I mentioned, the portfolio valuations have picked up more so as there's been concerns about the market, but we're also we rolled out a new product that's actually this week called polls, and it's made up of retail listings data. And what that is, is every night Black Book scrubs every every vehicle listed for sale in the US and Canada. And we're basically putting out trends of real time information on what's going on in the market. We're putting out there of course, how many units are available? Where are they at? How long are they taken to turn as far as sale? What is the day supply on the vehicles, are they CPO, are they EVs all types of information just direct on the market. So it's very powerful. A lot of it it's tailored towards our manufacturer, clients where they need to look at different things as far as how their how their CPO program's moving. But also some of our marketing clients where they look at it and say, hey, you know, where do we need to send these vehicles? You know, there's a high supply of of EVs in Northern California. Looks like there's a low supply in Texas, listed on there. Then we also have floorplan companies, which are basically lenders that lend money to dealers to purchase vehicles to put on their lots and sell to the consumer. And so a lot of times, they can check and double check to make sure that the money they lend out on these different vehicles, these vehicles are actually live and for sale, or these vehicles have actually sold or not. So it's really some cool stuff. It's differently different than your traditional Black Book data. But some of the trends is is kind of pulling back the curtains on some of the things that we have internally, and putting it out there to the market to help our clients.

Rich Alterman  39:26
And once again, that was called Pulse. Yep, Pulse. Thanks for sharing that. Well, this is Rich Alterman, and we've been syncing up with Brian Clegg, Senior Lender Solutions Manager at Black Book. Thank you, Brian, for joining me today and sharing some background on Black Book and trends in the auto industry. As part of the post of this podcast, we will provide a link to Black Book's Weekly Market Insight updates, which comes out every Tuesday. So click on that link, you can sign up and get that trends report on on a weekly basis. Hope you all enjoyed this podcast and please stay connected with GDS Link and The Lending Link to listen to future podcasts and catch up on the ones you've missed. Thank you and make it a great day. Thanks for listening. If you've enjoyed today's episode, please be sure to subscribe on Apple, Spotify, Google, or wherever you listen to your podcasts. And be sure to leave us a review. Follow us on LinkedIn and connect with us on Twitter at GDS Link that's at G D S L I N K. Have a question for the show or have a specific topic you want us to cover. Hit the link in the description to drop us a note. Thank you for lending us part of your day. Make it a great one.