Desking Tool Back-End Profit Optimization
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Solution Overview
Problem
Existing desking tools and dealer management systems do not account for all potential profits in vehicle transactions, leading to missed opportunities for automotive dealerships, as they only optimize front-end gross profit and do not accurately determine maximum available back-end spread and product, resulting in unrealized profits and out-of-structure deals.
Innovation Solution
A system that determines and presents the maximum available back-end product and back-end spread within payment and total advance limits, allowing users to adjust deal structures to maximize back-end profit, and provides tools for rolling back amounts financed or payments to bring deals back into structure, ensuring profitability and compliance with lender guidelines.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of energy
If existing desking tools only optimize front-end gross profit, then the deal structuring process is simple, but back-end profits are lost and deals may go out of structure
Solution Approach 1:
The patent segments the profit optimization process into distinct components: front-end gross profit calculation, back-end spread calculation, and back-end product calculation. Each segment is handled by specific software modules that calculate and display their respective contributions, allowing the system to comprehensively optimize total profit while maintaining manageable complexity through modular architecture.
2Productivity
If dealerships manually structure deals without comprehensive optimization tools, then the system is simpler to operate, but productivity and profit optimization are reduced
Solution Approach 1:
The software system performs self-service by automatically calculating front-end gross, back-end spread, and back-end product based on input parameters. The system autonomously determines the deal structure that maximizes total profit and displays the results, eliminating the need for manual trial-and-error structuring while maintaining ease of operation through a user-friendly interface that requires minimal input from the dealer.
3Reliability
If deals are structured without considering maximum available back-end spread and product, then the structuring process is faster, but deals go out of structure requiring re-contracting
Solution Approach 1:
The system performs preliminary action by calculating and displaying the maximum available back-end spread and back-end product before the dealer finalizes the deal structure. This advance calculation ensures that the dealer can structure the deal within lender guidelines from the beginning, preventing out-of-structure deals and the subsequent time-consuming re-contracting process.
4Loss of energy
If comprehensive profit optimization is implemented, then total profit increases, but the complexity of determining optimal structure increases
Solution Approach 1:
The software system acts as an intermediary between the complex optimization calculations and the dealer. It handles the complex mathematics of determining optimal front-end gross, back-end spread, and back-end product combinations, then presents the results in a simplified format that shows the total profit and recommended deal structure, eliminating the need for the dealer to understand or perform the complex calculations manually.
Data Source
AI summary
Methods, apparatuses, and computer program products are provided for facilitating financing of a product transaction. A method may include determining a maximum available back-end product for the product transaction as a function of one or more of a target payment limit or a total advance limit. The method may also include determining a maximum available back-end spread for the product transaction as a function of the target payment limit. The method may further include presenting the maximum available back-end product and the maximum available back-end spread. Corresponding apparatuses and computer program products are also provided.