ONTARIO, Calif. (1/10/13)--Credit unions should benchmark the performance of their asset disposition programs against key metrics commonly used by top performing remarketing companies, according to a new white paper from CUDL.
The free white paper, "Effective Asset Disposition," offers insight to benchmarks and best practices based on strategies of national automotive wholesale remarketers.
Vehicle repossessions for U.S. credit unions reached $317 million in 2008, but have continued to improve past couple of years, the white paper said. In the past year, credit unions reduced the volume of repossessed vehicles, with quantity declining by 16% to just under $145 million.
The credit union average value per repossessed vehicle was $10,161 at the end of the second quarter of 2012, said CUDL. Nearly 75% of credit union repossessed vehicles are valued from $5,000 to $20,000. As a result, credit unions need to enact procedures that make disposition of these assets more efficient, timely and cost effective, according to the white paper.
"Top performing credit union management teams view efficient and effective asset disposition as an integral part of the lending cycle, in the same vein as managing credit risk, balancing loan portfolios, and implementing sound collection practices," the paper said. "Credit unions that manage the whole sale disposition may well mitigate risk by reducing loan losses, enhancing their ability to lend through improved cash flow from the sale of repossessed assets."
The white paper recommends that credit unions benchmark their program's against metrics used by top-performing remarketing companies nationally. The metrics include:
Days-to-sale, measuring the time elapsed between when a credit union asset is repossessed and when the credit union receives funds sale of the asset;
Retention rate at auction, the percentage of wholesale book value earned from the sale of the repossessed asset;
Fees credit unions pay to their auction provider and any third-party remarketers; and
The number of bidders the credit unions' providers are delivering.
The paper also recommends that auctions and third-party remarketers provide an online tool so remote buyers can compete with bidders attending sale-day auctions.