U.S. patent application number 12/261991 was filed with the patent office on 2009-02-26 for computer system for financing ownership of a vehicle.
This patent application is currently assigned to FORD MOTOR COMPANY. Invention is credited to Anand Chandran, Mark Kaczynski, Robert Earl Pence, Bob H. Rieth, Kirk Zumhoff.
Application Number | 20090055310 12/261991 |
Document ID | / |
Family ID | 29552913 |
Filed Date | 2009-02-26 |
United States Patent
Application |
20090055310 |
Kind Code |
A1 |
Chandran; Anand ; et
al. |
February 26, 2009 |
Computer System for Financing Ownership of a Vehicle
Abstract
A computer system for financing ownership of a vehicle is
disclosed. The computer system includes a computer application for
implementing the following steps on a computer: calculating an
amount financed of a RIC or loan for financing the purchase and
ownership of a first vehicle at or before inception of the
purchase; at or before inception of the purchase, determining a
first payment amount for each of a plurality of first payments to
occur before a decision point and a second payment amount for each
of a plurality of second payments to occur after the decision
point, the first payment amount being a predetermined percent lower
than the second payment amount; and prompting contact of the
customer based on the decision point to promote trade-in of the
first vehicle.
Inventors: |
Chandran; Anand; (Aliso
Viejo, CA) ; Zumhoff; Kirk; (Highland, MI) ;
Kaczynski; Mark; (Canton, MI) ; Pence; Robert
Earl; (Goodrich, MI) ; Rieth; Bob H.; (Grosse
Pointe Woods, MI) |
Correspondence
Address: |
BROOKS KUSHMAN P.C./FGTL
1000 TOWN CENTER, 22ND FLOOR
SOUTHFIELD
MI
48075-1238
US
|
Assignee: |
FORD MOTOR COMPANY
Dearborn
MI
|
Family ID: |
29552913 |
Appl. No.: |
12/261991 |
Filed: |
October 30, 2008 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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10248557 |
Jan 29, 2003 |
|
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12261991 |
|
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60362406 |
Mar 7, 2002 |
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Current U.S.
Class: |
705/38 |
Current CPC
Class: |
G06Q 40/00 20130101;
G06Q 40/025 20130101; G06Q 40/02 20130101; G06Q 30/0201
20130101 |
Class at
Publication: |
705/38 |
International
Class: |
G06Q 40/00 20060101
G06Q040/00 |
Claims
1. A computer system for financing ownership of a vehicle and
comprising a computer having a computer application for
implementing the following steps on the computer: calculating an
amount financed of a RIC or loan for financing the purchase and
ownership of a vehicle at or before inception of the purchase of
the vehicle; at or before inception of the purchase of the vehicle,
determining a first payment amount for each of a plurality of first
payments to occur before a decision point and a second payment
amount for each of a plurality of second payments to occur after
the decision point, the first payment amount being a predetermined
percent lower than the second payment amount; and prompting contact
of the customer based on the decision point to promote trade-in of
the vehicle, the customer avoids one or more of the plurality of
second payments and the step of receiving repayment is discontinued
prior to the expiration of the RIC or loan by the customer
relinquishing ownership of the vehicle.
2. A computer-implemented method for financing ownership of a
vehicle by a customer, the method comprising: financing the
purchase and ownership of a vehicle by a customer with a RIC or
loan of an amount financed at or before inception of the purchase
of the first vehicle; at or before inception of the purchase of the
vehicle, determining a first payment amount for each of a plurality
of first payments to occur before a decision point and a second
payment amount for each of a plurality of second payments to occur
after the decision point, the first payment amount being a
predetermined percent lower than the second payment amount; storing
the decision point in a computer database; accessing the computer
database to identify if the RIC or loan is near the decision point;
if the RIC or loan is near the decision point, contacting the
customer based on the decision point to promote trade-in of the
vehicle, the customer avoids one or more of the plurality of second
payments and the step of receiving repayment is discontinued prior
to the expiration of the RIC or loan by the customer relinquishing
ownership of the vehicle.
3. The computer-implemented method of claim 2, wherein the
contacting step is carried out via e-mail.
4. The computer-implemented method of claim 3, further comprising
storing RIC or loan information associated with the RIC or loan for
the vehicle in the computer database for use during the contacting
step.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This application is a continuation and claims priority to
U.S. application Ser. No. 10/248,557, filed Jan. 29, 2003, entitled
"Method For Financing Ownership Of A Vehicle," which claims the
benefit of U.S. provisional application Ser. No. 60/362,406, filed
Mar. 7, 2002, entitled "An Automotive Finance Process That Provides
The Low Customer Payments And Customer Trade Cycle Management
Features Of A Lease Without The Residual Exposure."
BACKGROUND
[0002] 1. Technical Field
[0003] At least one aspect of the present invention generally
relates to computer systems for financing ownership of a
vehicle.
[0004] 2. Background Art
[0005] In a typical vehicle leasing arrangement between a vehicle
manufacturer and a vehicle customer, a vehicle dealership supplies
the vehicle to the vehicle customer and the vehicle leasing company
retains ownership of the vehicle. At the end of the lease term, the
vehicle customer usually has two options: (1) the vehicle customer
can return the vehicle to the vehicle dealership (which in general
is returned to the vehicle leasing company), (2) the vehicle
customer can purchase the vehicle for the purchase option
price.
[0006] Under typical leasing agreement terms, the vehicle customer
has the first option to purchase the vehicle. In turn, if the
customer decides not to purchase the vehicle, the dealership can
purchase it from the vehicle leasing company. If the LEV is less
than the market value, the customer or dealership usually purchases
the vehicle to preserve the equity in the vehicle or turn a profit
(if the vehicle is sold) equal to the difference between the LEV
and the market value. If the LEV is greater than the market value,
the customer and dealer passes on their option and the vehicle
leasing company remains the owner of the vehicle. Consequently, the
vehicle leasing company absorbs a loss equal to the difference
between the LEV and the market selling price. This problem is
commonly referred to as the residual loss problem.
[0007] Vehicle ownership plans financed by a finance company, bank
or other financing institution can avoid the residual loss problem
associated with typical leasing arrangements. Under a typical
vehicle ownership plan with an indirect finance company, the
vehicle customer purchases the vehicle from a dealer and enters
into a retail installment contract (RIC) (a contract which
evidences the purchase of the vehicle on credit over time) with
that dealer. The dealer then assigns that RIC to the finance
company. Under a typical ownership plan with a direct finance
company or bank, the customer obtains a loan from the bank or other
finance company and uses that loan to purchase a vehicle from a
dealer. In such case, the finance company, bank or other financial
institution would not have the residual loss responsibility since
it does not own the vehicle.
[0008] Vehicle ownership plans may not fit all of a vehicle
customer's concerns. In recent times, vehicle customers are
generally motivated by lower monthly payments and vehicle
ownership. Leasing is generally recognized as the primary tool to
deliver low monthly payments. On the other hand, vehicle ownership
plans typically require substantially higher payments at similar
terms.
[0009] To align the vehicle customer's concerns of low payments and
ownership, automotive companies have created alternatives to
typical leasing programs and vehicle ownership plans. For example,
Mazda Motor Company has offered the "Progressive Payment Plan". The
vehicle customer purchases a vehicle from a Mazda dealer on a RIC
which is assigned to Mazda American Credit. The customer then makes
monthly payments to Mazda American Credit in order to pay off the
RIC. According to the "Progressive Payment Plan", Mazda Motor
Company pays half of the monthly payment for six months and pays a
quarter of the monthly payment for the next six months.
[0010] Although this program and similar programs offer low initial
payments and ownership, these programs do not address trade cycle
management. Trade cycle management is the practice of promoting
vehicle trade-in and purchase of a new vehicle. As a result, there
exists a need to provide a computer system for financing ownership
of a vehicle with a RIC or a loan having a RIC or loan term which
offers low initial payments and vehicle ownership while promoting
vehicle trade-in and purchase of a new vehicle by providing a
decision point, which is at or about the midpoint of the RIC or
loan term.
SUMMARY
[0011] In one embodiment, a computer system for financing ownership
of a vehicle is disclosed. The computer system includes a computer
application for implementing the following steps on a computer:
calculating an amount financed of a RIC or loan for financing the
purchase and ownership of a first vehicle at or before inception of
the purchase; at or before inception of the purchase, determining a
first payment amount for each of a plurality of first payments to
occur before a decision point and a second payment amount for each
of a plurality of second payments to occur after the decision
point, the first payment amount being a predetermined percent lower
than the second payment amount; and prompting contact of the
customer based on the decision point to promote trade-in of the
first vehicle.
[0012] These and other aspects of the present invention will be
better understood in view of the attached drawings and following
detailed description of the invention.
BRIEF DESCRIPTION OF THE DRAWINGS
[0013] The features of the present invention which are believed to
be novel are set forth with particularity in the appended claims.
The present invention, both as to its organization and manner of
operation, together with further objects and advantages thereof,
may best be understood with reference to the following description,
taken in connection with the accompanying drawing which:
[0014] FIG. 1 is a block flow diagram illustrating a preferred
embodiment of a method for financing ownership of a vehicle
according to one or more embodiments of the present invention;
and
[0015] FIG. 2 is an environment, i.e., a computer system, suitable
for financing ownership of a vehicle according to one or more
method embodiments of the present invention.
DETAILED DESCRIPTION OF THE EMBODIMENTS
[0016] As required, detailed embodiments of the present invention
are disclosed herein. However, it is to be understood that the
disclosed embodiments are merely exemplary of the invention that
may be embodied in various and alternative forms. Therefore,
specific functional details disclosed herein are not to be
interpreted as limiting, but merely as a representative basis for
the claims and/or as a representative basis for teaching one
skilled in the art to variously employ the present invention.
[0017] A preferred method of practicing the present invention
includes two basic steps: (a) financing the purchase of a vehicle
with a RIC or loan repaid with a set of first payments followed by
a set of second payments, and (b) contacting the customer prior to
the decision point to promote trade-in of the vehicle and new
vehicle purchase. The first payments last until a decision point
and are about 10 percent to about 40 percent lower than the second
payments. The customer can avoid at least a substantial number of
the second payments by trading in the vehicle and purchasing a new
vehicle.
[0018] FIG. 1 is a schematic diagram illustrating a preferred
methodology for implementing the present invention. As represented
in block 12, the purchase of a vehicle is financed with a RIC or
loan having a decision point.
[0019] The decision point is preferably provided by structuring the
repayment of the RIC or loan with a set of first payments and a set
of second payments. The decision point preferably marks the point
during the RIC or loan repayment period in which the loan payment
switches from the first payment to the second payment. The level of
the first and second payments can be dependent upon a number of
considerations, including, but not limited to, providing a lower
first payment to encourage the initial purchase of the vehicle and
providing a higher second payment to promote trade-in and new
vehicle purchase.
[0020] The first and second payments are preferably made by the
vehicle customer on a periodic basis, most preferably a monthly
basis. However, it should be understood that the first and/or
second payments can be made by the customer on a weekly, biweekly
or semi-monthly basis to best fit a particular implementation of
the present invention. It should also be understood that the amount
financed can be decreased by a down payment or vehicle trade-in
made by the vehicle customer. The RIC or loan term can be from
about 36 months to about 84 months to best fit a particular
implementation of the present invention.
[0021] In accord with a preferred embodiment, the first payments
are about 10 percent to about 40 percent lower than the second
payments. The first payments provide the customer with low initial
payments typical of a vehicle lease arrangement and the benefits of
vehicle ownership. Moreover, the prospect of the higher second
payments may reduce customer sticker shock as they shop for a new
vehicle.
[0022] Additionally, the customer has a different expectation of
the payment level at the decision point relative to the end of a
typical leasing arrangement. The customer's expectation under the
financing methods of the present invention is that the payment
level will increase about 10 to about 40 percent after the decision
point. With respect to a typical leasing arrangement, the customer
expects that the payment level on a new lease vehicle will be
comparable to the existing payment. Faced with the prospect of a
higher payment under the present invention, the customer will be
pleased if they can trade in their vehicle for a new vehicle with
payments equivalent to the second payment level of their existing
vehicle RIC or loan. On the other hand, a lease vehicle customer
may experience sticker shock as they re-lease.
[0023] There are at least four different techniques that can be
used individually or in combination to provide the set of first
payments followed by the set of second payments. It should be
understood that these techniques can be implemented using a
computer system, computer software and/or computer application.
Preferably, the computer system is a hand-held calculator that can
be utilized by a dealership representative to estimate at least the
first and second payment levels during negotiations with a vehicle
customer. FIG. 2 depicts a computer system 100 suitable for
implementing one or more embodiments. Computer system 100 includes
computer 102, computer software 104 and database 106.
[0024] One technique includes writing the first portion of the RIC
or loan term in which the customer makes the first payments for a
longer amount of time than the second portion of the RIC or loan
term in which the customer makes the second payments. As a
non-limiting example, the first portion of the RIC or loan can
amortize at about 6 years (72 months), and the second portion of
the RIC or loan can amortize at about 3 years (36 months).
[0025] Another technique includes utilizing the same interest rate
and different payment amount of the first and second payments. As a
non-limiting example, the first portion of the RIC or loan (first
36 months of a 66 month RIC or loan) can have monthly payments set
lower than a comparable 60 month RIC or loan. The second portion
can have monthly payments adequate to fully amortize the remaining
principal balance over the remaining 30 months. A preferred
implementation of this technique includes programming a hand-held
computer or software application downloaded into the dealer's
computer system to compute the first and second payment levels
based on a financing amount, an interest rate, the decision point
and the term of repayment. For example, the financing amount can be
$15,000.00, the interest rate can be 5.90 percent APR, the decision
point can be at 36 months, and the term of repayment can be 66
months. Accordingly, the first payment level can be computed by
using the 5.90 percent APR amortized over 60 months and multiplied
by 0.85 (to provide the lower payment). Using this formula, the
first payment level is $245.90 for the first 36 months of the RIC
or loan. The second payment level can be computed by fully
amortizing the remaining principal balance after the first payments
end over the remaining term of the RIC or loan, i.e., 30 months.
Using this formula, the second payment level is $268.69. It should
be understood that the input values, i.e., financing amount,
interest rate, decision point, and loan term can be adjusted
individually or in combination to best fit a particular
implementation of the present invention. For example, the vehicle
customer may want the dealership representative to provide payment
levels for a variety of different cars or down payment levels.
[0026] Yet another technique includes issuing a rebate for the
first portion of the RIC or loan. As a non-limiting example, a $30
monthly rebate can be given to the customer for the first 36 months
of a 72 month RIC or loan.
[0027] Alternatively, the first payments can have a first interest
rate that is lower than a second interest rate which is applied to
the second payments.
[0028] The estimated equity point of the RIC or loan is considered
in determining the decision point. The equity point refers to the
point during the repayment term in which the amount owed is
substantially equivalent to the value of the vehicle. At the equity
point, the vehicle owner can sell their vehicle and use the
proceeds to pay off the amount owed. Alternatively, the vehicle
owner can trade in their vehicle to a dealership. In this case, the
amount owed is paid off by the dealer so that the customer can
enter into a new lease or vehicle purchase without an outstanding
balance on the RIC or loan.
[0029] It should be understood that the equity point varies with
the payment amount, deprecation rate of a vehicle, and the down
payment. Generally, the slower the depreciation rate or the higher
the down payment, the sooner the equity point will be reached. The
methods of the present invention can be utilized with vehicles that
have relatively low or high depreciation or when the customer
considerably lowers the amount financed with a significant down
payment or when the vehicle is purchased with no down payment.
[0030] Some customers may be in a slightly negative equity position
(otherwise referred to as the GAP) at the decision point, i.e., the
customer owes more money than the vehicle is worth when it is sold
to the dealer and the RIC or loan is paid off by the dealer. If the
customer decides to trade in his vehicle for a new vehicle, the
vehicle manufacturer can pay a portion of the GAP to the finance
company as an incentive to the customer for purchasing a new
vehicle from the same vehicle manufacturer. It should be understood
that the GAP costs represent a real cost associated with the
customer selling their vehicle and purchasing a new vehicle.
Preferably, an optimum mix is achieved which offers low first
payments to encourage purchase while promoting high customer
loyalty by paying part of the trade-in GAP.
[0031] As represented in block 14, the customer is contacted prior
to the RIC or loan reaching the decision point to promote trade-in
and new vehicle purchase. The customer is preferably contacted by a
dealership representative or the finance company (or vendor working
on their behalf). The information relating to the customer's RIC or
loan, most particularly the decision point, can be stored in a
computer database, for example, computer database 106 of FIG. 2.
Preferably, the dealership representative can access the computer
database in order to identify vehicle customers that have RIC or
loans that are near the decision point. Alternatively, the computer
database can be linked to an application, such as software 104 of
FIG. 2, that can alert the dealership representative of vehicle
customers that are near the decision point, i.e., through an e-mail
notification, such as e-mail notification 108. Other RIC or loan
information, i.e., first and second payment levels, can also be
stored in the computer database for dealership representative
retrieval and use during customer contact.
[0032] It should be understood that the customer can be contacted,
for example, by conventional mail, electronic mail or telephone. It
should also be understood that contact can also be made after the
decision point to best fit implementation of the present invention.
The customer can be notified that at least a portion of GAP costs
can be avoided and at least a portion of the higher second payments
can be avoided by trading in the current vehicle and purchasing a
new vehicle. The RIC or loan payment for the new vehicle can be
advertised as being the same or lower than the current low first
payment. In some cases, the customer can also be reminded that the
primary warranty for the vehicle may be ending.
[0033] Armed with this information, the vehicle customer is in a
better position to evaluate trading in their vehicle for a new
vehicle, as depicted in decision block 16. Preferably, the new
vehicle is financed using the methods of the present invention,
i.e., uneven payment streams with a decision point. From a
dealership's perspective, if the vehicle customer does trade in
their vehicle, the trade cycle is improved relative to a standard
vehicle RIC or loan. From a vehicle manufacturer's perspective, the
majority of marketing costs can be directed at the first portion of
the loan term rather than the full length of the RIC or loan term.
Not all customers may feel they are in a position to trade or make
the higher second payments. As an alternative to trade-in or new
vehicle purchase, the finance company, bank or other financial
institution can offer refinancing so that the vehicle customer can
lower their payment by extending the term of the RIC or loan.
[0034] Accordingly, the present invention can be implemented in the
following non-limiting example. A customer can purchase Vehicle A
without a down payment. For purposes of the example, Vehicle A can
retail at $14,795 MSRP with an estimated residual value of 60
percent after 24 months, 53 percent after 36 months and 50 percent
after 41 months. The set of first payments can be set at a level to
amortize in 72 months, i.e., $272 per month at 9.75. Accordingly,
the equity point is reached approximately after about 42 monthly
payments. The decision point can be set at month 40. At the
decision point, the first payments end and the second payments
begin. The second payments can be $295 per month, or $25 more per
month than the first payments. It should be understood that the
increase can be more or less than $25 as long as the amount is high
enough to motivate a customer to trade in, but not so high as to
deter the customer from considering the methods of the present
invention.
[0035] Prior to the decision point at 40 months, preferably between
months 34 and 40, the customer can be reminded of the impending
payment increase with a telephone call, via conventional mail or
via e-mail. However, it is understood that contact can be made
after the decision point and in such case the portion of switching
costs avoided may be adjusted downward relative to trade-in and new
vehicle purchase prior to the decision point. If the elevation in
monthly payments does not serve as adequate motivation for the
customer to trade in, then the manufacturer may offer a renewal
incentive designed to cover all or some of the potential GAP costs.
During the same contact, the customer can also be notified that
financing is available for the purchase of a new vehicle with a
competitive payment. This offer would appeal to many vehicle
customers, especially if they value low payments and/or ownership
of a new vehicle.
[0036] While the best mode for carrying out the invention has been
described in detail, those familiar with the art to which this
invention relates will recognize various alternative designs and
embodiments for practicing the invention as defined by the
following claims.
* * * * *