U.S. patent application number 14/017679 was filed with the patent office on 2018-05-17 for systems and methods for optimization of a financial transaction.
This patent application is currently assigned to Nowcom Corporation. The applicant listed for this patent is Nowcom Corporation. Invention is credited to Don Rufus Hankey, Amanpal Singh.
Application Number | 20180137563 14/017679 |
Document ID | / |
Family ID | 39669045 |
Filed Date | 2018-05-17 |
United States Patent
Application |
20180137563 |
Kind Code |
A9 |
Hankey; Don Rufus ; et
al. |
May 17, 2018 |
SYSTEMS AND METHODS FOR OPTIMIZATION OF A FINANCIAL TRANSACTION
Abstract
A method of determining a structure for financing a consumer
product through a computer implemented process according to one
embodiment comprising the steps of: receiving one or more fixed
inputs including a monthly payment value and a down payment value;
calculating a plurality of potential financial structures for the
consumer product based upon the monthly payment value and the down
payment value; and determining from the plurality of potential
financial structures, a financial structure that provides a
greatest profit for a seller of the consumer product.
Inventors: |
Hankey; Don Rufus; (Los
Angeles, CA) ; Singh; Amanpal; (Los Angeles,
CA) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Nowcom Corporation |
Los Angeles |
CA |
US |
|
|
Assignee: |
Nowcom Corporation
Los Angeles
CA
|
Prior
Publication: |
|
Document Identifier |
Publication Date |
|
US 20150066737 A1 |
March 5, 2015 |
|
|
Family ID: |
39669045 |
Appl. No.: |
14/017679 |
Filed: |
September 4, 2013 |
Related U.S. Patent Documents
|
|
|
|
|
|
Application
Number |
Filing Date |
Patent Number |
|
|
13278178 |
Oct 21, 2011 |
8560438 |
|
|
14017679 |
|
|
|
|
11627846 |
Jan 26, 2007 |
8069112 |
|
|
13278178 |
|
|
|
|
Current U.S.
Class: |
1/1 |
Current CPC
Class: |
G06Q 40/02 20130101;
G06Q 40/025 20130101; G06Q 40/00 20130101 |
International
Class: |
G06Q 40/02 20120101
G06Q040/02 |
Claims
1. A method of determining a structure for financing a consumer
product through a computer implemented process comprising:
receiving in a computer a plurality of inputs including at least a
monthly payment value and a down payment value; calculating in the
computer a plurality of potential financial structures for consumer
products based upon the monthly payment value and the down payment
value; and selecting by the computer from the plurality of
potential financial structures, a financial structure that provides
a greatest profit for a seller of one of the consumer products,
wherein the consumer product is a vehicle and wherein the potential
financial structures include a sub-prime loan.
Description
CROSS-REFERENCE TO RELATED APPLICATIONS
[0001] This patent application is a continuation of and claims
benefit to copending application Ser. No. 13/278,178, filed Oct.
21, 2011, entitled "SYSTEMS AND METHODS FOR OPTIMIZATION OF A
FINANCIAL TRANSACTION," assigned to the same Assignee hereof. The
aforementioned application is a continuation of and claims benefit
to patented Ser. No. 11/627,846, filed Jan. 26, 2007, entitled
"SYSTEMS AND METHODS FOR OPTIMIZATION OF A FINANCIAL TRANSACTION,"
assigned to the same Assignee hereof.
BACKGROUND OF THE INVENTION
[0002] 1. Technical Field
[0003] The present invention relates to automated credit approval
systems and methods. More specifically, the present invention
relates to automated credit approval systems and methods used when
conducting a financial transaction for a vehicle.
[0004] 2. Discussion of the Related Art
[0005] In the used car industry, there are many people with
sub-prime credit who are looking to purchase a vehicle. In general,
people with bad credit are simply looking to buy any reasonably
drive-worthy vehicle that the dealer is willing to sell to them and
for which they are able to obtain financing provided the financing
company agrees to the down payment amount and the monthly payment
amount they can afford. Historically, in order for a person with
bad credit to receive approval on financing, a lender would need to
review the person's loan application and make a determination as to
whether financing would be approved or rejected. In many instances,
this process could be three or four days, thus preventing a deal
from being made on the spot. Anytime, the person leaves the car lot
without the deal being completed there is a greater chance that the
person will walk away without purchasing the vehicle.
[0006] Thus, more recently, automated loan approval systems have
become available. For example, one such system is described in U.S.
patent application Ser. No. 10/043,676, filed Jan. 9, 2002,
entitled METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILE
DEALERS, which application is incorporated herein by reference in
its entirety. Another such automated approval system is described
in U.S. Pat. No. 6,950,807, issued Sep. 27, 2005, entitled SYSTEM
AND METHOD FOR PROVIDING FINANCING, which patent is incorporated
herein by reference in its entirety.
[0007] While these automated approval systems have greatly enhanced
the ability of a dealer to close a deal the same day that the
person walks onto the lot, there are improvements upon these
systems that can be made to aid a dealer in putting together the
best deal possible.
SUMMARY OF THE INVENTION
[0008] The embodiments described herein provide systems and methods
for providing a seller of a consumer product with the greatest
profit when structuring a loan for a financial transaction within
the constraints of the down payment amount and the monthly payment
amount a consumer can afford.
[0009] One embodiment can be characterized as a method of
determining a structure for financing a consumer product through a
computer implemented process comprising the steps of: receiving one
or more inputs including a monthly payment value and a down payment
value; calculating a plurality of potential financial structures
for the consumer product based upon the monthly payment value and
the down payment value; and determining from the plurality of
potential financial structures, a financial structure that provides
a greatest profit for a seller of the consumer product. Optionally,
the embodiment can further include the steps of: selecting the
financial structure that provides the greatest profit for the
seller of the consumer product; and outputting to a display device
an indication of the financial structure that provides the greatest
profit for the seller of the consumer product. Alternatively, some
embodiments can further include the steps of: calculating a
plurality of potential financial structures for each of a plurality
of consumer products based upon the monthly payment value and the
down payment value; and determining from the plurality of potential
financial structures, a financial structure that provides a
greatest profit for a seller for each of the plurality of consumer
products. In one embodiment, when the consumer is not very
particular about the product, the seller can determine which
product from the plurality of the consumer products he wants to
sell to the consumer, for example, on the basis of profit/price
ratio and the demand for that particular product.
[0010] Another embodiment can be characterized as a method of
determining a structure for financing a consumer product through a
computer implemented process comprising the steps of: receiving one
or more inputs including a monthly payment value and a down payment
value; storing a first dealer profit value calculated using the
monthly payment value, the down payment value and a first of a
plurality of loan-term lengths; calculating a second dealer profit
value based upon the monthly payment value, the down payment value
and a second of the plurality of loan-term lengths; and determining
the greater of the first dealer profit value and the second dealer
profit value.
[0011] A subsequent embodiment includes a method of determining a
structure for financing a consumer product through a computer
implemented process comprising the steps of: receiving one or more
inputs including a monthly payment value and a down payment value;
storing a first dealer profit value calculated based upon the
monthly payment value, the down payment value and a first of a
plurality of loan-term lengths; calculating an amount financed
value based upon at least the monthly payment value and a second of
a plurality of loan-term lengths; calculating a vehicle purchase
price based upon at least the amount financed value and the down
payment value; calculating a second dealer profit value based upon
a second of the plurality of loan-term lengths; and determining the
greater of the first dealer profit value and the second dealer
profit value.
BRIEF DESCRIPTION OF THE DRAWINGS
[0012] The above and other aspects, features and advantages of the
present embodiments will be more apparent from the following more
particular description thereof, presented in conjunction with the
following drawings, wherein:
[0013] FIG. 1 is a flow diagram depicting a sub-prime automobile
financing procedure according to the prior art;
[0014] FIG. 2 is a flow diagram depicting a sub-prime automobile
financing procedure according to one embodiment;
[0015] FIG. 3 is a diagram depicting a screen shot of a software
program for a sub-prime automobile financing system according to
one embodiment;
[0016] FIG. 4 is a diagram depicting a screen shot of the software
program shown in FIG. 3, where the software program permits a
sub-prime financing procedure to be applied to a specified car, or
to all cars in a dealership inventory;
[0017] FIG. 5 is a diagram depicting a screen shot of the software
program shown in FIG. 3, where the software program prompts a user
to input a down payment value and monthly payment value according
to one embodiment;
[0018] FIG. 6 is a diagram depicting a screen shot of the software
program shown in FIG. 3, where the software program has adjusted
the terms of a deal structure (e.g., price and loan-term length)
for a specific car in response to input of the down payment valued
and the monthly payment value such as depicted in FIG. 5;
[0019] FIG. 7 is a flow diagram depicting a method for maximizing a
dealer's gross profit on a financial transaction of a vehicle
according to one embodiment;
[0020] FIG. 8 is a diagram depicting a screen shot of the software
program shown in FIG. 3, where the software program prompts a user
to input a down payment value, a monthly payment value, and the
minimum dealer profit acceptable by the dealer for a sale according
to one embodiment;
[0021] FIG. 9 is a diagram depicting a screen shot of the software
program shown in FIG. 3, where the software program rank orders a
dealer's inventory of cars according to the gross profit possible
for the dealer, based on the input of a customer's fixed down
payment, the customer's fixed monthly payment, and the minimum
dealer gross acceptable for a sale, as depicted in FIG. 8; and
[0022] FIG. 10 is a flow diagram depicting a method for determining
a maximum dealer's gross profit on a financial transaction of a
vehicle while taking into consideration certain limiting factors
according to one embodiment.
[0023] Corresponding reference characters indicate corresponding
components throughout the several views of the drawings. Skilled
artisans will appreciate that elements in the figures are
illustrated for simplicity and clarity and have not necessarily
been drawn to scale. For example, the dimensions, sizing, and/or
relative placement of some of the elements in the figures may be
exaggerated relative to other elements to help to improve
understanding of various embodiments. Also, common but
well-understood elements that are useful or necessary in a
commercially feasible embodiment are often not depicted in order to
facilitate a less obstructed view of these various embodiments. It
will also be understood that the terms and expressions used herein
have the ordinary meaning as is usually accorded to such terms and
expressions by those skilled in the corresponding respective areas
of inquiry and study except where other specific meanings have
otherwise been set forth herein.
DETAILED DESCRIPTION
[0024] The following description is not to be taken in a limiting
sense, but is made merely for the purpose of describing the general
principles of the embodiments described herein. The scope of the
invention should be determined with reference to the claims. The
present embodiments address the problems described in the
background while also addressing other additional problems as will
be seen from the following detailed description.
[0025] The embodiments described herein below are specific to the
sub-prime auto financing industry; however, the system and methods
described can also optionally be utilized in other industries, such
as, for example the financing of any new or used vehicle or
consumer product, such as automobiles, motorcycles, All Terrain
Vehicles (ATVs), campers, Recreational Vehicles (RVs), boats, jet
skis, water craft and other consumer products that can be
financed.
[0026] Additionally, some of the following embodiments greatly
enhance the ability of a dealer to close a deal the same day that
the person walks onto the lot and aid a dealer in putting together
the best deal possible. A `best deal` is a deal that maximizes the
dealer profit within the constraints of the down payment amount and
the monthly payment amount that a customer can afford. Dealer
profit is not necessarily maximized by just increasing the price of
the vehicle to allowable limits.
[0027] Referring to FIG. 1 a flow diagram 100 is shown depicting a
sub-prime automobile financing procedure according to the prior
art.
[0028] First, in step 102, a customer goes to a dealership to
review car inventory in the hopes of finding a vehicle to purchase.
If the customer cannot pay for the vehicle with available cash, the
customer will most likely look to finance the vehicle. A sub-prime
customer (i.e. a customer with a credit score that is less than
ideal) brings the initial down payment to the deal and also usually
has a requested maximum monthly payment. The customer is generally
less concerned (if at all) with other terms of the deal, such as,
for example, the vehicle cost, the vehicle type, loan term and the
interest rate of the loan. These other terms of the deal are less
important because the customer generally is simply looking to
purchase any vehicle he/she qualifies for.
[0029] Next, in step 104, the customer will ask to see what
vehicles he/she qualifies for based on the down payment and the
monthly payment the customer can afford. In step 106, the dealer
utilizes a software program, such as the Deal Management Software
System, disclosed and described in U.S. patent application Ser. No.
10/043,676, filed Jan. 9, 2002, entitled METHODS AND SYSTEMS FOR
DEAL STRUCTURING FOR AUTOMOBILE DEALERS, to input or adjust the
price, financing loan-term length, interest rate, trade-in value of
the customer's vehicle, and other input parameters to try meet the
customer's needs. Another such program is described in U.S. patent
application Ser. No. 11/332,616, filed Jan. 13, 2006, entitled
METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILE DEALERS
which application is incorporated herein by reference in its
entirety.
[0030] Based on the values input by the dealer, the software
program calculates the customer's monthly payment, down payment,
the dealer's gross profit from the sale, and other information, as
shown in step 108. Following, in step 110, the dealer compares the
resulting monthly and down payments and other factors with those
requested by the customer. If the monthly and down payments and
other factors are comparable to those requested by the customer,
the dealer moves on to step 112. Otherwise, the dealer must go back
to step 106 and adjust the price, term, interest rate, and other
variables of the deal. At step 112, the dealer checks to see
whether he will sufficiently profit from the deal. For instance, if
the dealer has a minimum desired gross profit of $1000 per car, and
the profit from the deal results in only an $800 profit, the dealer
will adjust the price, term, interest rate, and other variables of
the deal at step 106.
[0031] Once the dealer's profit meets a sufficient level and the
customer's down payment value and monthly payment value have been
approximately met, at step 114, the dealer presents the deal to the
customer, who can either reject the deal, sending the process back
to step 106, or accept the deal, as shown in step 116. Presumably,
the customer will accept the deal, since the customer's requests
regarding the monthly payment and the down payment have been met.
As is apparent, this prior art procedure requires the dealer to
manually adjust terms of the deal to try to meet both the dealer's
and the customer's financial needs. Additionally, this can result
in financing deals that do not provide the dealer with the greatest
profit as there is no way for the dealer to know what deal
structure will provide him/her the greatest profit, waste the
dealer and customer's time, potentially leave the customer buying a
car that does not best meet his/her needs and potentially lose
business by not making a deal at all.
[0032] In order to solve the problems described above and enhance
automated financial approval systems, various systems and methods
for structuring a loan that provides a dealer with the greatest
profit are described below with reference to FIGS. 2-9.
[0033] Referring now to FIG. 2, a flow diagram 200 is shown
depicting a sub-prime automobile financing procedure according to
one embodiment.
[0034] At step 202, a customer having sub-prime credit goes to a
dealership to review car inventory in the hopes of finding a
vehicle to purchase. As described above, if the customer can not
pay for the vehicle with available cash, the customer will most
likely look to finance the vehicle. A sub-prime customer (i.e. a
customer with a credit score that is less than ideal) brings the
initial down payment to the deal and also usually has a requested
maximum monthly payment. Similar to above, the customer is
generally less concerned (if at all) with other terms of the deal,
such as, for example, the vehicle cost, the vehicle type, and the
interest rate of the loan. These other terms of the deal are less
important because the customer generally is simply looking to
purchase any vehicle they qualify for.
[0035] Next, in step 204, the customer will ask to see what
vehicles they qualify for based on the down payment and the monthly
payment the customer can afford. At step 206, the dealer inputs the
customer's desired down payment and monthly payments, and other
considerations (e.g., trade-in allowance), into a sub-prime
automobile financing software application for a particular vehicle
in his/her vehicle inventory. In accordance with the present
embodiment, the software application includes dealer profit
maximizing feature. This feature of the software application is
referred to herein, for example as "Maximize Vehicle Profit" or the
MVP' system or application. Based on the input values for the down
payment and monthly payment, in step 208, the MVP.TM. system
automatically determines the terms of the deal (e.g., vehicle
price, loan-term length, and the interest rate) that provide the
dealer with the greatest profit while meeting the desired financial
terms of the customer. No guess work or re-entering of terms is
necessary such as was required in the prior art systems described
above. One exemplary process of maximizing the dealer profit for a
vehicle is described herein below with reference to FIG. 7.
[0036] At step 210, the dealer checks to see whether he will
sufficiently profit from the deal. Since the MVP.TM. system
maximizes the profit for the dealer for any particular car, the
dealer will always be happy with a deal unless there is no
combination of deal terms for the car that meets the dealer's
minimum profit requirement. One embodiment that is discussed below
with reference to FIGS. 8 and 9 permits the dealer to pre-select
only those cars that will meet his profit requirement. At this
point, the dealer will present the financial terms of the deal to
the customer at step 212 or will require the customer to choose a
different car. Because the deal is structured to always exactly or
approximately meet the customer's requests regarding the monthly
payment amount and the down payment amount, the customer has a high
probability of accepting the deal, as shown in step 214.
[0037] Referring next to FIG. 3, a diagram is shown illustrating a
screen shot of a software program for a sub-prime automobile
financing system 300 according to one embodiment. It should be
understood that many different types of information and user
interfaces can be utilized in various embodiments and that the
specific implementation shown in this application is merely
illustrative of one user interface. The various display panels and
information provided to the user will vary in different
embodiments.
[0038] The automobile financing system 300 includes a user
interface screen 302. The user interface screen 302 includes four
display panels: a deal structure panel 304, a calculation results
panel 306, a vehicle information panel 308, and an approval panel
310. The user interface screen 302 also includes a dealer profit
maximizing function 312 (also referred to herein as the MVP.TM.
function 312). The user interface screen 302 can optionally also
includes another section that contains customer's credit report
information and other demographics.
[0039] The deal structure panel 304 displays information related to
the structure of the deal. For instance, the deal structure panel
304 displays the terms of the deal, including: price of the
financed car, a trade-in value given to a car traded in by the
customer, the amount still owed on the trade-in vehicle, the amount
of cash down to be paid by the customer, the cost of a service
contract for the vehicle, title fees, insurance, and gap-insurance
charges, and the amount of taxes to be paid by the customer.
Further terms include the number of payments (loan-term length),
the amount of each payment, the date of the first payment, and the
sales tax rate.
[0040] The deal structure panel 304 is also user editable such that
the terms can be changed by a user by clicking or navigating to the
term display field and typing in any specified amount. For
instance, to edit the price of the car, a user would click on the
current price (depicted in FIG. 3 as $6,427.25) and type in a new
price. When terms in the deal structure panel 304 are edited, some
non-editable values in the deal structure panel 304, the deal
approval panel 310 and the calculation results panel 306 are
updated accordingly. For instance, raising the price of the car
will automatically update the sales tax in the deal structure panel
304, and automatically update the dealer gross in the calculation
results panel 306.
[0041] Finally, the deal structure panel 304 displays the maximum
amount of financing the customer is permitted to obtain (i.e., "MAX
OK TO FIN"). The amount permitted to be financed is based on
several factors, such as, for example, the customer's credit score
and the worthiness of the car that comes after taking into
consideration the input values in the panel 308. In one exemplary
embodiment, the automobile financing system 300 utilizes the credit
processing features described in U.S. patent application Ser. No.
10/043,676, filed Jan. 9, 2002, entitled METHODS AND SYSTEMS FOR
DEAL STRUCTURING FOR AUTOMOBILE DEALERS to pull the customer's
credit scores and to determine the amount of financing to afford
the customer.
[0042] The calculation results panel 306 displays the fees to be
paid by the dealer, and the dealer profit for the terms of the
current deal. For instance, the calculation results panel 306
displays the amount of the dealer's financial services fee (shown
in FIG. 3 as "Westlake Discount") and acquisition fee. The
financial services fee is generally set by the financing company,
and may be a fixed cost, or may be based on factors such as the
sale price of the vehicle, amount to be financed, the vehicle being
sold, the customer worthiness and the interest rate. The
calculation results panel 306 also displays how much money will be
paid to the dealer (shown in FIG. 3 as "Net Check to Dealer"),
which is equal to the amount financed, less the financial services
fee (shown as "Discount" in the calculation results panel 306) and
acquisition fee. The calculation results panel 306 also displays
the amount of profit the dealer will make on the deal (shown in
FIG. 3 as "Dealer Gross"). The dealer's profit, in the present
example, is equal to the sale price of the car, plus document fees,
plus warranty amount, less warranty cost, less the cost of the
vehicle (shown as "Cost" in the vehicle information panel 308),
less the financial services fee, less acquisition fee and the
overadvance amount. The overadvance amount is the difference
between actual amount financed and the "MAX OK TO FIN" if actual
amount financed is more than the "MAX OK TO FIN" within some
prescribed limit (e.g., $1000.00). Certain finance companies let
the dealer pay the difference till the entire loan-term length is
successfully over without customer defaulting in between. Once the
loan-term length is over, the financing company returns this
difference amount back to the dealer. Not all finance companies
have a loan structure that includes the concept of an
"overadvance," thus the above calculation is only illustrative and
a dealer's profit can be calculated differently in other
embodiments. For example, the above calculation may include or
exclude different variables depending upon the structure of the
deal.
[0043] The vehicle information panel 308 displays information
pertaining to a selected vehicle. For example, a vehicle from the
dealer's local inventory or a vehicle from a larger dealer network
can be selected and the information about the selected vehicle will
be displayed in the vehicle information panel 308. Information that
is displayed in the vehicle information panel 308 includes, for
example, vehicle make, model, year, mileage, NADA book value/KBB
book value, car cost to the dealer, car class type, car type. The
information can also include warranty cost to the dealer and the
finance charge/profit to the financing company. Again, as mentioned
above, different fields will be displayed to a user depending upon
the specific user interface of the software application.
[0044] The deal approval panel 310 displays whether the structure
of the deal and the amount financed are approved. Whether the deal
is approved depends upon the terms of the deal, such as, for
example, the vehicle price, number of payments (term length), and
amount of each payment. For instance, if the lender will not
finance any buyer for more than 40 months, when a deal calls for a
term of 50 months, the deal structure will not be approved. If the
dealership refuses to sell any car for less than $500, a deal with
a sale price of $450 will also be rejected. The amount financed
approval depends upon whether the amount financed exceeds the
approved maximum financing amount that was discussed above. If the
amount financed exceeds the approved maximum, the deal will have to
be restructured in order for the deal to be approved. As described
above, in prior systems, a dealer would need to manipulate the
various terms of the deal in an effort to find a structure that is
approved and also provides the dealer with an acceptable profit on
the vehicle. The deal that is best for the dealer is likely not
readily apparent to the dealer causing a dealer, for example, to
accept any approved deal.
[0045] In accordance with the embodiments described herein, the
MVP.TM. function 312 automatically structures any deal to maximize
the dealer's profit as well as satisfies the constraints on down
payment and monthly payment put forth by the customer.
[0046] Referring next to FIG. 4, a diagram is shown illustrating a
screen shot of the software program shown in FIG. 3, wherein the
software program permits a sub-prime financing procedure to be
applied to a specified car, or optionally to all cars in a
dealership inventory. According to one embodiment, as shown in FIG.
4, when a user accesses the MVP.TM. function 312, the automobile
financing system 300 displays an option window 400. The option
window 400 comprises a current vehicle feature 402 that permits the
dealer profit maximizing function to be applied to a specific car,
and a compare all inventory feature 404 that applies the dealer
profit maximizing function to all cars accessible to the dealership
through its inventory and/or dealership network.
[0047] If a user selects the compare all feature 404 instead of the
current vehicle feature 402, then the MVP.TM. function 312 will be
applied to all cars accessible to the dealership through its
inventory and/or dealership network. This procedure is described
below with reference to FIGS. 8 and 9. According to one embodiment,
if a user selects the current vehicle feature 402, the MVP.TM.
function 312 is applied to the vehicle currently displayed in
vehicle information panel 308. Upon selection of the current
vehicle feature 402 the software program proceeds in prompting the
user for information such as is shown in FIG. 5.
[0048] Referring next to FIG. 5 a diagram is shown depicting a
screen shot of the software program shown in FIG. 3, where the
software program prompts a user to input a down payment value and
monthly payment value by displaying a prompt window 500 according
to one embodiment.
[0049] The prompt window 500 includes a down payment field 502, and
a monthly payment field 504. The user enters a down payment value
that the customer says he/she can afford into down payment field
502, a monthly payment value that the customer says he/she can
afford into monthly payment field 504, and selects "Calculate." The
software program then automatically adjusts the loan-term length
and vehicle price to maximize the dealer's profits. Thus, as shown
in FIGS. 4, 5, and 6, when a down payment of $2,250.00 and a
monthly payment of $250.00 are input into the prompt window 500,
the price of the car is raised from $6,427.25 to $7,122.73, the
number of payments/loan-term is reduced from 31 to 26, and the
dealer profit increases from $1,502.25 to $2.062.73. In prior
systems, the dealer would have had to guess and the various terms
(e.g., the Loan-Term and Vehicle Price) in order to maximize
his/her profit. This was a time consuming and unreliable process if
it was even attempted by the dealer. Due to the large number of
combinations of Term and Vehicle Price, there is a good chance that
the dealer would end up putting together a deal that did not
provide him/her with the greatest profit. One exemplary process for
determining the maximum profit for the dealer is described with
reference to FIG. 7.
[0050] Referring next to FIG. 7, a flow diagram 700 is shown
depicting an exemplary method for maximizing a dealer's gross
profit on a financial transaction of a vehicle according to one
embodiment. Generally, the software program operates by varying the
length of the term (T) (i.e. the number of payments required before
the loan is paid off) to maximize the dealer's profit for the
selected vehicle.
[0051] First, at step 702, the customer's desired monthly payment
(FP) and down payment (DP) are input into the system 300, as
discussed above with reference to FIG. 6. Following, at step 703, T
is initialized to a minimum allowable value for T. The initial
value of T is a minimum value specified by the dealership, the
system 300, or by the customer and can be dependent on a number of
variables, including, for example, a credit score, loan amount or
buyer income among other things. Optionally, the minimum value of T
can be set to one (1) indicating only one monthly payment will be
necessary to pay off the loan. Alternatively, for example, T can be
set to twelve (12) indicating a loan-term of one year. Next, at
step 704, the software program calculates the amount (A) to be
financed for loan-term length (T). The amount (A) to be financed
can be calculated, for example, using the following formula, where
APR is an annual percentage rate (APR):
A = FP * 12 APR * [ 1 - { 1 + APR 12 } - T ] ##EQU00001##
[0052] Since the customer specifies the desired monthly payment
value (FP), as discussed above, and since the APR is a constant
rate usually specified by the financier, the amount to be financed
is varied only by the current term length (T).
[0053] Next, at step 706, the resulting vehicle sale price (P) is
calculated. The vehicle sale price (P) is determined, for example,
by using the following formula:
P = A - DP + ( Trade - In Allowance ) - ( Document - Fees ) - (
Smog - Fees ) - ( Sales Taxes ) - ( Warranty - Amount ) - (
Licensed - Fees ) - ( Trade - Payoff ) - ( Insurance - Amounts ) -
( Miscellaneous ) ##EQU00002##
[0054] Aside from the amount (A) to be financed which we calculated
above, the remainder of the variables are either constant or a
linear or non-linear function of other constants and Price. Because
of this inherent non-linearity, the relation between price (P) and
A is directly proportional, though not necessarily linear.
[0055] All of the calculations described herein are exemplary for a
specific automated financial software program (or potentially
partially automated) loan approval system. However, the
calculations can easily be modified to work with any kind of
financial approval system. For example, the non-linearity/linearity
described above may not be present in other financial systems.
Thus, one of ordinary skill in the art would be able to adapt the
equations and calculations described herein to other financial
systems that may have a different approval process or different
costs that must be taken into account when structuring the entire
deal.
[0056] Following, at the next step, step 708, after calculating the
vehicle sale price (P), it is determined whether the structure of
the deal and the amount (A) to be financed are approved, as
discussed above. The next step involves calculating the dealer
profit according to the following formula:
(Dealer Profit)=(Vehicle Sale Price)-(Vehicle Purchase
Price)-(Financial Services Fee)-(Acquisition Fee)+(Document
Fees)+(Warranty Amount)-(WarrantyCost)-(OverAdvance Amount)
[0057] The Vehicle-Sale-Price, Acquisition Fee and
Vehicle-Purchase-Price are constant or determined from the previous
step. The Financial-Services-Fee varies depending upon the
structure of the deal and is calculated, for example, as described
in U.S. patent application Ser. No. 11/332,616, filed Jan. 13,
2006, entitled METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR
AUTOMOBILE DEALERS, which is incorporated herein in its entirety.
The remainder of the components are either constant or vary as per
the deal structure.
[0058] If the structure and amount are not approved, the process
continues to step 714. Otherwise, the process continues to step 710
where the dealer profit is compared to a prior recorded dealer
profit (e.g., for a different term length T). If the newly computed
dealer profit is larger than the prior recorded dealer profit, the
current values for the loan-term T, vehicle sale price (P), and
dealer profit are stored and the prior recorded values dealer
profit, they remain saved and the process continues to step 714. It
should be understood that for the first value of T that provides an
approved deal, no comparison needs to be made, the values for
loan-term T, vehicle sale price (P), and dealer profit are simply
stored by the software program.
[0059] At step 714, the value of T is incremented, for example by
one interval corresponding to a term length of T+1. Alternatively,
if the financing loan-term is only valid in 3 or 6 month
increments, then T can be increased by 3 or 6, respectively. Next,
at step 716, the new value of T is compared to a maximum permitted
value of T. Generally, the maximum value permitted for T is, for
example, 72, indicating the loan will be paid off after 6 years.
However, the maximum value for T can be changed depending upon the
credit score, loan amount or other variables. If the value of T is
less than or equal to the maximum value for T, the process returns
to step 704, where steps 704 through 716 are repeated with the new,
larger value of T. Otherwise, the process moves to step 718, where
the MVP.TM. function determines whether any terms are stored. If
none are stored, no combination of terms met the approval process
discussed above within the constraints put forth by the customer
for that particular vehicle/car. If, however, there are stored
terms, they reflect those terms that maximize the dealer profit.
These terms are considered the optimized solution for the dealer
and the customer, and are selected to specify the terms of the
deal, as indicated in step 720. These are the terms that give the
dealer the greatest profit on the vehicle.
[0060] In this way, after iterating from the minimum to maximum
value for T, the terms that maximize the dealer profit for a given
vehicle are always identified and selected. It is important to note
that in one embodiment, however, since the financial services fee
is determined based on the cost of the vehicle and/or the amount
financed, merely having the highest possible vehicle sale price
does not guarantee the highest possible dealer profit. Thus, a
dealer who did not have access to the MVP.TM. function 312
described herein would likely have a very hard time attempting to
structure a deal that provides the dealer with the greatest
profit.
[0061] Additionally, as described herein, the "greatest profit" or
"maximum profit" describes a value that is the largest value out of
a plurality of values that are calculated using a finite number of
term lengths T. Generally, when structuring a loan, the T will be
an integer number corresponding to a number of months of the term
of a loan. Thus, the "greatest profit" or "maximum profit" may not
be the absolute maximum dollar amount that can be calculated using
the above equations (or other suitable equations), but is the
greatest value when taking into consideration the general
constraints of a loan. For example, there is a limit on minimum
Payment amount per month that the finance company will accept.
Thus, while the above equations may provide a result, the finance
company will not approve the loan.
[0062] Referring back to FIG. 4, in one embodiment, if a user
selects the compare all inventory feature 404 instead of the
current vehicle feature 402, then the MVP.TM. function 312 will be
applied to all cars accessible to the dealership through its
inventory and/or dealership network.
[0063] FIG. 8, is a diagram illustrating a screen shot of the
software program shown in FIG. 3, where the software program
prompts a user to input a down payment value, a monthly payment
value, and the minimum dealer profit acceptable for a sale
according to one embodiment. As shown in FIG. 8, after selecting
the compare all feature 404, system 300 displays a vehicle listing
window 800 comprising a down payment field 802, a monthly payment
field 804, a minimum dealer profit field 806 and a vehicle list
808. The user enters the customer's desired down payment into down
payment field 802, the customer's desired monthly payment into
monthly payment field 804, the dealer's desired minimum profit into
minimum dealer profit field 806, and selects "Calculate."
[0064] FIG. 9 is a diagram illustrating a screen shot of the
software program shown in FIG. 3, where the software program rank
orders a dealer's inventory of cars according to the gross profit
possible for the dealer, based on the input of a customer's fixed
down payment, the customer's fixed monthly payment, and the minimum
dealer gross acceptable for a sale. As shown in FIG. 9, the
software program (MVP.TM. function 312) then automatically displays
a listing of all the vehicles in the dealer's inventory and/or
dealership network that meet the specified criteria in vehicle list
808. The vehicles are rank ordered by dealer profit, which is the
maximum amount of profit the dealer will make if he sells the
particular vehicle using the MVP.TM. function 312 specified deal
terms. Thus, the MVP.TM. function 312 permits a dealer to identify
cars that will maximize his profit for a given customer prior to
trying to sell any car to the customer, saving time and hassle, and
ensuring both the dealer and the customer are satisfied with the
deal and the vehicle eventually chosen. The software program runs
the method described above with reference to FIG. 7 for every car
on the lot and displays a list of all of the vehicles for which a
valid deal can be put together. As described, the list is ordered
by the maximum dealer profit that can be obtained for each vehicle.
If the dealer's maximum profit for a specific car is lower than the
minimum dealer profit specified in field 806, then the car is
dropped from consideration. Once each car in the dealer's inventory
and/or dealer network has been considered, those that meet the
dealer's minimum profit threshold are rank ordered and displayed to
the user in vehicle list 808.
[0065] When the dealer selects any vehicle in the vehicle list 808,
the MVP.TM. function 312 specified deal terms are automatically
propagated into the term display fields of deal structure panel
304, and the vehicle information is automatically displayed by the
vehicle information panel 308. The compare all feature 404 of the
software program described above with reference to FIG. 4,
according to one embodiment, operates very similarly to the current
vehicle feature 402 discussed above, and only adds an additional
iterative loop. That is, for each car in the dealer's inventory
and/or dealer network, the software programs operates as described
above with respect to the current vehicle feature 402 and the
method described in FIG. 7.
[0066] Similar to the above, the "greatest profit" or "maximum
profit" describes a value that is the largest value out of a
plurality of values that are calculated using a finite number of
term lengths T. Generally, when structuring a loan, the T will be
an integer number corresponding to a number of months of the term
of a loan. Thus, the "greatest profit" or "maximum profit" may not
be the absolute maximum dollar amount that can be calculated using
the above equations (or other suitable equations), but is the
greatest value when taking into consideration the general
constraints of a loan. For example, as described above, there is a
limit on minimum Payment amount per month that the finance company
will accept. Thus, while the above equations may provide a result,
the finance company will not approve the loan.
[0067] Referring next to FIG. 10, a flow diagram 1000 is shown
depicting an exemplary method for maximizing a dealer's gross
profit on a financial transaction of a vehicle while taking into
consideration certain limiting factors according to one embodiment.
Generally, the software program operates by varying the length of
the term (T) (i.e. the number of payments required before the loan
is paid off) to maximize the dealer's profit for the selected
vehicle. Additionally, the software program can limit other
variables in the calculations (e.g., a maximum loan-term length
that the buyer is willing to accept) and determine the best
structure for the dealer while meeting the buyer's needs.
[0068] First, at step 1002, the customer's desired monthly payment
(FP) and down payment (DP) are input into the system 300, as
discussed above with reference to FIG. 6. Following, at step 1003,
T is initialized to a minimum allowable value for T. The initial
value of T is a minimum value specified by the dealership, the
system 300, or by the customer and can be dependent on a number of
variables, including, for example, a credit score, loan amount or
buyer income among other things. Optionally, the minimum value of T
can be set to one (1) indicating only one monthly payment will be
necessary to pay off the loan. Alternatively, for example, T can be
set to twelve (12) indicating a loan-term of one year. Next, at
step 1004, the software program calculates the amount (A) to be
financed for loan-term length (T).
[0069] The amount (A) to be financed can be calculated, for
example, using the following formula, where APR is an annual
percentage rate (APR):
A = FP * 12 APR * [ 1 - { 1 + APR 12 } - T ] ##EQU00003##
[0070] Since the customer specifies the desired monthly payment
value (FP), as discussed above, and since the APR is a constant
rate usually specified by the financier, the amount to be financed
is varied only by the current term length (T).
[0071] Next, at step 1006, the resulting vehicle sale price (P) is
calculated. The vehicle sale price (P) is determined, for example,
by using the following formula:
P = A - DP + ( Trade In Allowance ) - ( Document Fees ) - ( Smog
Fees ) - ( Sales Taxes ) - ( Warranty Amount ) - ( License Fees ) -
( Trade Payoff ) - ( Insurance Amounts ) - ( Miscellaneous )
##EQU00004##
[0072] Aside from the amount (A) to be financed which we calculated
above, the remainder of the variables are either constant or a
linear or non-linear function of other constants and Price. Because
of this inherent non-linearity, the relation between price (P) and
A is directly proportional, though not necessarily linear.
[0073] Following, at the next step, step 1008, after calculating
the vehicle sale price (P), it is determined whether the structure
of the deal and the amount (A) to be financed are approved, as
discussed above. The next step involves calculating the dealer
profit according to the following formula:
(Dealer-Profit)=(Vehicle-Sale-Price)-(Vehicle-Purchase-Price)-(Financial-
-Services-Fee)-(Acquisition Fee)+(Document-Fees)+(Warranty
Amount)-(WarrantyCost)-(OverAdvance Amount)
[0074] The Vehicle-Sale-Price, Acquisition Fee and
Vehicle-Purchase-Price are constant or determined from the previous
step. The Financial-Services-Fee varies depending upon the
structure of the deal and is calculated, for example, as described
in U.S. patent application Ser. No. 11/332,616, filed Jan. 13,
2006, entitled METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR
AUTOMOBILE DEALERS. The remainder of the components are either
constant or vary as per the deal structure.
[0075] Again, as stated above, all of the calculations described
herein are exemplary for a specific automated financial software
program (or potentially partially automated) loan approval system.
However, the calculations can easily be modified to work with any
kind of financial approval system. For example, the
non-linearity/linearity described above may not be present in other
financial systems. Thus, one of ordinary skill in the art would be
able to adapt the equations and calculations (or create different
calculations and equations) described herein to other financial
systems that may have, for example, a different approval process or
different costs that must be taken into account when structuring
the entire deal.
[0076] If the structure and amount are not approved, the process
continues to step 1014. Otherwise, the process continues to step
1010 where the dealer profit is compared to a prior recorded dealer
profit (e.g., for a different term length T). If the newly computed
dealer profit is, for example, closer to the dealer's expected
gross-profit within a predefined range, the current values for the
loan-term T, vehicle sale price (P), and dealer profit are stored
and the prior recorded values from step 1012 are disregarded.
However, if the previously recorded values are closer to the
dealer's expected gross-profit, they remain saved and the process
continues to step 1014. In this example, an additional input into
the system is an "expected gross-profit value" that introduces an
additional variable that needs to be taken into consideration when
structuring the financing. Thus, the software program can be
customized to emit a deal structure that matches dealer requested
gross-profit on a deal rather than the "best deal" or greatest
profit as described above with reference to FIG. 7. In this
example, the dealer may be motivated to limit profit in order to
avoid losing a customer who realizes that his down-payment and
monthly-payment requests have been met but, for example, the
loan-term is too high or the interest rate is too high. Depending
upon the lender, sometimes loan-terms can be lowered at the cost of
dealer-profit.
[0077] In yet another embodiment, limits can be put on any output
variable (e.g., Net Check to Dealer, Discount, Amount Financed,
etc.) and the limited valued is used as an input value into the MVP
program. The deal can then be optimized while taking into account
the constraints put forth into the system.
[0078] Turning next to step 1014, the value of T is incremented,
for example by one interval corresponding to a term length of T+1.
Alternatively, if the financing loan-term is only valid in 3 or 6
month increments, then T can be increased by 3 or 6, respectively.
At step 1016, the new value of T is compared to a maximum permitted
value of T. Generally, the maximum value permitted for T is, for
example, 102, indicating the loan will be paid off after 6 years.
However, the maximum value for T can be changed depending upon the
credit score, loan amount or other variables or alternatively can
be limited by as an input value (such as described above). If the
value of T is less than or equal to the maximum value for T, the
process returns to step 1004, where steps 1004 through 1016 are
repeated with the new, larger value of T. In an alternative
embodiment, for the methods described in FIGS. 7 and 10, T can be
initialized to a maximum value of T in step 1003 (step 703 for FIG.
7) and then reduced at step 1014 (step 7014 for FIG. 7). Steps 1004
through 1016 are then repeated where at step 1016, if T is less
than the minimal T allowed, the process will continue at step
1018.
[0079] At step 1018, the MVP.TM. function determines whether any
terms are stored. If none are stored, no combination of terms met
the approval process discussed above within the constraints put
forth by the customer and/or dealer for that particular
vehicle/car. If, however, there are stored terms, they reflect
those terms that maximize the dealer profit while optionally taking
into consideration other input constraints. These terms are
considered the optimized solution for the dealer and the customer,
and are selected to specify the terms of the deal, as indicated in
step 1020. These are the terms that give the dealer the greatest
profit on the vehicle while taking into constraints in addition to
the down payment value and monthly payment value.
[0080] In this way, after iterating from the minimum to maximum
value for T (or from the maximum value of T to the minimum value of
T), the terms that maximize the dealer profit for a given vehicle
are always identified and selected while also taking into
consideration other input variables that may have constraints. It
is important to note that in one embodiment, however, since the
financial services fee is determined based on the cost of the
vehicle and/or the amount financed, merely having the highest
possible vehicle sale price does not guarantee the highest possible
dealer profit. Thus, a dealer who did not have access to the
MVP.TM. function 312 described herein would likely have a very hard
time attempting to structure a deal that provides the dealer with
the greatest profit while taking into account other input
constraints.
[0081] Additionally, as described herein, the "greatest profit" or
"maximum profit" describes a value that is the largest value out of
a plurality of values that are calculated using a finite number of
term lengths T and optionally also taking into consideration other
constraints variables. Generally, when structuring a loan, the T
will be an integer number corresponding to a number of months of
the term of a loan. Thus, the "greatest profit" or "maximum profit"
may not be the absolute maximum dollar amount that can be
calculated using the above equations (or other suitable equations),
but is the greatest value when taking into consideration the
general constraints of a loan and other input constraint values.
For example, the additional constraint values, as described above,
may be a maximum loan-term length the buyer is willing to pay, an
expected dealer profit value, loan interest rate or other input
variables. As described above, these variables may need to be set
in order to prevent the customer from walking away from the
deal.
[0082] The specific equations described herein are exemplary and
other equations used to maximize a dealer's profit may be used in
alternative embodiments. Additionally, the embodiments described
herein with reference to FIGS. 2-9 may be implemented using a
computer that includes a central processing unit such as a
microprocessor, and a number of other units interconnected, for
example, via a system bus. Such a computer may also include, for
example, a Random Access Memory (RAM), Read Only Memory (ROM), an
I/O adapter for connecting peripheral devices such as, for example,
disk storage units and printers to the bus, a user interface
adapter for connecting various user interface devices, a
communication adapter for connecting the computer to a
communication network (e.g., a data processing network) and a
display adapter for connecting the bus to a display device.
[0083] Additionally, the various embodiments may be implemented on
one or more of the following exemplary devices including: a
personal computer, a laptop, a tablet PC, a Personal Digital
Assistant (PDA) and other electronic devices independent of the
underlying operating system (e.g., Windows, Linux, MAC, etc.).
Additionally, the various embodiments can be implemented using a
distributed computing environment or a local computing environment.
For example, the embodiment described herein can be implemented as
a personal computer client software architecture as well as a
web-based architecture. In this manner, the user interface can be,
for example, an application interface for a software program that
is running locally or on a remote computer. Alternatively, the user
interface can be a browser based interface where the computations
and method described herein are implemented on a remote computer
and provided to a user through the browser application. In
accordance with some embodiments, the various aspects described
above may be implemented using computer programming or engineering
techniques including computer software, firmware, hardware or any
combination or subset thereof. Any resulting program, having
computer-readable code means, may be embodied or provided within
one or more computer-readable media, thereby making a computer
program product, i.e., an article of manufacture, according to the
invention. The computer readable media may be, for instance, a
fixed (hard) drive, diskette, optical disk, magnetic tape,
semiconductor memory such as read-only memory (ROM), etc., or any
transmitting/receiving medium such as the Internet or other
communication network or link. The article of manufacture
containing the computer code may be made and/or used by executing
the code directly from one medium, or by copying the code from one
medium to another medium. In addition, one of ordinary skill in the
art of computer science will be able to combine the software
created as described with appropriate general purpose or special
purpose computer hardware, Personal Digital Assistant (PDA)
hardware, or other electronic hardware to create a computer system
or computer sub-system embodying the various methods of the
invention.
[0084] While the invention herein disclosed has been described by
means of specific embodiments and applications thereof, other
modifications, variations, and arrangements of the present
invention may be made in accordance with the above teachings other
than as specifically described to practice the invention within the
spirit and scope defined by the following claims.
* * * * *