Putting Alternative Credit Data in the Driving Seat of Auto Finance with Don Reese

By: Molecula

“Great moments are born from great opportunities” ~Herb Brookes

Our guest believes that data created amazing opportunities for his business. Former CEO of DriveTime and BridgeCrest, Don Reese, joins us to discuss using alternative credit data scoring to rethink lending risk and serving the underserved in the auto-retail market.

DriveTime is one of the largest automotive used car sales and finance companies in the US. With more than 125 dealerships, employing 4000+ employees, and handling automobile finance for over 700,000 customers, they have transformed the car sales environment with their proprietary scoring technology and financing model. Don also headed up Bridgecrest, which provides over $2 billion in auto financing annually.

Don explains how he has evolved from relying on gut instinct and anecdotal evidence to cautiously trusting the data. Join us for this inspiring and enlightening conversation with Jason Dorsey in the Leading with Data podcast.

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The Auto Finance Industry and Challenging the Path to Ownership

Don has been in the automotive industry for 35 years. While he doesn’t ever remember making a distinctive choice to be in automotive retail, looking back, he wouldn’t have changed a thing.

He knows the automotive industry inside out. His career has taken him from family franchises to large, publicly-owned automotive retailers and back again. He has straddled both new and used auto sales and also crossed into the world of auto finance. It wasn’t until 2017, however, that DriveTime approached him to become their CEO thereby making another transition, this time into pre-owned auto retail.

Don was initially attracted to the position because he knew the company had a great reputation and a strong culture, but what sealed the deal for him was the incredible opportunity he saw in being able to serve an underserved segment of credit-challenged buyers.

In the pre-owned auto world, Don explains, subprime auto finance was lacking. It was an opportunity that would not only serve DriveTime well, but also became the driving force behind Don’s time there.

 

Alternative Credit & Rethinking Finance for the Subprime Market

Don explains how DriveTime decided to move away from traditional scoring methods for credit. Instead, they used an in-house finance model that uses behavioral scoring to build up a customer’s score.

“I brought in the emphasis on the importance of the vehicle in the credit score as well as the customer.”

By combining data from various sources such as behavioral credit, vehicle history, depreciation, warranty, cost of ownership, and taking into consideration service and maintenance agreements – he transformed credit scoring.

Don explains how using data this way, he built up a comprehensive score for the customer based on more than just credit. This resulted in better performance for DriveTime and a better experience for the customer. It’s something he’s incredibly proud of.

“When I talk about what brought me to DriveTime, I have a lot of pride in the purpose of trying to serve what I believe has been an underserved segment of the population as it relates to automotive retailing and financing.”

 

Building Confidence in Data in the Automotive Industry

How does Don feel the use of data has changed in the automotive industry?

“If you went back 15 years ago, the access to data was much more difficult. The confidence in data was not as great as it is today, so there was a great skepticism early on.”

Coming from family-owned businesses and franchises, Don acknowledges that there wasn’t much confidence in data. People were reliant on their gut instinct and their wealth of experience. Even he admits to battling his instincts and relying on his internal anecdotal data in the early days.

He eventually began to trust data and grow in confidence in his data-driven decision-making. The only caveat for him, however, is in ensuring that as a leader, you always ask good questions about the validity of the data and uncover any bias in the analysis.

Even though he supports data as a driving force, Don is cautious about ignoring the human element. Sometimes even if the odds are low, there could be an exceptional person or people who could still make something a success.

If the odds are not in your favor of making a field goal, but the ball is being held by Tom Brady, well, then sometimes you can ignore the data!

 

What Key Traits Make a Good Leader?

Don has held almost every C-Suite position and managed a lot of moving parts in that time. So what does he believe makes a good leader?

Integrity, intelligence, and intensity.

Don also cites being an effective communicator from “showroom to boardroom.” This involves not only being able to communicate well but also being what he calls an “aggressive listener.”

What about leaders who lack confidence? Well, Don believes that you can always out-prepare people. It is a great equalizer and a strategy that has served Don well.

Finally, he believes in the power of being able to turn a negative into a positive. Especially with what has happened in this pandemic year, Don is already positive about the incredible changes that will come as a result. That’s why one of his favorite quotes comes from Olympic Hockey coach Herb Brookes and the movie, Miracle.

“Great moments are born from great opportunity.”

With the right attitude, Don believes that our greatest outcomes will come from our greatest challenges. No doubt his positive attitude will continue to bring about positive change in his future endeavors.

Check out the rest of the Leading with Data podcast series for more fascinating insights from business leaders around the world. You can listen to the podcast on your favorite podcast app including Apple Podcasts and Spotify.