This article is for DeskManager 11. For DeskManager Online see BHPH Setup in DMO.
The Default Settings window allows you to predefine different behavior for your Buy-Here/Pay-Here deal. Use the radio buttons, drop down boxes and check boxes as necessary.
- Store Deals as In-House – By marking this box, every new deal with have the ‘In-House Financing’ box marked on the Finance tab of the deal. If a deal is saved with the Sold Retail or Sold Wholesale option, the system will automatically unmark this box.
- Adjust Account Balance with Pay-Off – When this box is unmarked, the account balance is considered to be the amount owed by the customer if all payments take place exactly on time and are paid exactly the amount the customer owes, or if the deal completes exactly as described by the amortization schedule. This Account Balance figure may include interest that might not have been earned yet. By marking this option, the system will force the Account Balance to match the Pay-Off (as of Today) figure.
- On Closed Accounts, Clear All Balances – When this box is unmarked the system will show any remaining balances that were present at the time the account was closed. When this box is marked, all balances will display zero.
- Payment Due Includes Next Period Interest (Rule of 78) – Following the letter of the Rule of 78 contract, the moment time has elapsed from the start of the loan, the customer immediately owes the interest for the upcoming payment. This is completely unlike a Simple Interest deal where interest is earned over time. When this box is unmarked the system will not display this interest that is owed by the customer until the next payment due date arrives. When this box is marked, DeskManager will display the interest that is currently owed according to the Rule of 78 contract.
- Show Overpaid Accounts as Zero Balance – This option deals with the Account Balance figure again. In a perfect world the customer will make payments on time every time and this balance will exactly reach zero when the final payment is made. Unfortunately in the Buy-Here/Pay-Here world, this is a very unlikely event. More often than not, our customers are going to be late with their payments. When this happens, the system will be collecting more interest than principal due to the nature of the customer being late and the way interest accrues every day. As a result, many accounts will appear as over paid because the system will end up collecting more interest than the original loan called for because the principal was not reduced as predicted by the Amortization Schedule. Accounts that still owe money may appear as overpaid as a result. Leaving this box unmarked the system will show a negative value for the amount collected over what was originally predicted by the Amortization Schedule. Marking this box will always show a zero once the amount predicted by the Amortization Schedule has been reached.
- Extra Principal applies to Late Fees and Adjustments (End of Loan) – When collecting the BHPH payments, the system will always attempt to satisfy outstanding interest and then the remainder of the payment will be applied towards principal. By default when a Late Fee or other adjustment has been applied to the deal, these adjustments will typically affect the Pay Off Balance. When the customer approaches the end of the loan, depending on any late fees or adjustments applied to this deal, there may be money still owed by the customer after the principal has been satisfied. By marking this box, once the principal of the loan has been satisfied, the system will then automatically use the remainder of the payment to satisfy any outstanding Late Fees or Adjustment until the loan is completed.
- On Closed Accounts, Show Principal Balance – This feature is dependent on the state of the On Closed Accounts, Clear All Balances option. If the Clear All option is unmarked, this item does nothing. If the Clear All option is selected, this item when unmarked will not display the remaining principal balance at the time the deal was marked as closed, but if this item is marked the system will display the remaining principal balance at the time the account was marked as closed.
Payment Collection Prompt Auto-Fill
You can choose whether the system prompts you for total payments due (which may include late fees and unpaid interest) or for a single periodic payment only. This applies to using the Collect Payment button found when a deal window is open and the Payments tab is being viewed.
Calculate Next Payment Due Date
DeskManager has several options available for calculating the Next Payment Due Date for your BHPH deal. Please review the following and select one according to your needs.
- Based on Principal Allocation in Payment Schedule – This option is used if you want DeskManager to advance the Next Payment Due Date based on taking the total principal collected so far and applying this to the Amortization Schedule values. The program will take that total amount collected so far towards principal (This is found on the Payments Tab of the customer’s deal, in the Collected/Applied area, left column) and compare that to the Total Principal column on the Amortization Schedule table. DeskManager will find the closest match on the table that is equal to or less than the total principal collected so far and will consider that row to be ‘Satisfied’. As a result the date listed as the due date for the next row in the table will become the customer’s Next Payment Due Date. What does this mean to the dealer? In the situation where the customer is typically paying after the payment due date, more of their payment is used to satisfy interest that is currently owed than is applied to principal. This results in the fact that these customers will never satisfy the requirements to advance that next payment due date unless they pay more than the periodic payment calls for so as to cover the missing principal. Their payments tend to show as late more often and will trigger the Automatic Late Fee tool to apply a late fee.
- Based on Total Payments Allocation – Using this option DeskManager will look at the ‘Payments’ figure (Also found on the Payments tab of the deal, in the Collected/Applied area in the left column) and compare that figure to the Total Payments column of the Amortization Schedule. DeskManager will find the closest match on the table that is equal to or less than the total payments collected so far and consider that row to be ‘Satisfied’. Again, DeskManager will then look at the due date found in the next row and will assign that as the customer’s Nest Payment Due Date. What does this mean to the dealer? In this situation DeskManager is basically ignoring how early or late a customer pays, but only concerning itself with the total that has been received so far when determining how to advance the next payment due date. Customers who pay the contracted payment amount are not penalized for being late as long as they are within the grace period. Obviously when paying late more of the payment is used to cover the interest that is due and over time that will cause the contract to take longer to complete, but that is the nature of Buy-Here Pay-Here.
- Always Advance One Period – This option does not use any of the payment figures to calculate the customer’s Next Payment Due Date, but looks instead at the Frequency that was selected when creating the deal and adds exactly one period to the current date when determining the Next Payment Due Date. For example, imagine a deal where the frequency of the deal was set to Monthly, the customer’s original due date was the 1st of the month and this option was selected when the deal was saved. If the customer should instead come in and make a payment on the 3rd of the month, the system would add exactly one period (in this case, a month) to that current date and that would become this customer’s Next Payment Due Date, or the 3rd of the following month. At the same time, if the customer should come in a few days early (for example on the 27th of the month) basically the same results will take place, the new payment date would become the 27th of the following month.
Along with these three options, there are modifiers that can be applied to the selected method.
- Never Advance Past Next Scheduled Due Date – This will apply to the calculation method selected. When a payment is received that would cause the next payment due date to advance more than one period, if this box is unmarked, the system will advance it according to the Amortization Schedule. If the box is marked, the system will not go past the next scheduled due date. Example, if the system is collecting on a monthly deal using the ‘Always Advance One Period’ due date method and the deal in question was originally setup for payments on the 1st of the month, if this box is unmarked and the user comes in on the 5th and makes a payment, the system will assign the next payment due date to be the 5th of the following month. If this box is marked and we consider the same situation, instead of making the 5th of the following month the new due date, the system would see that there was a scheduled due date for the 1st and would only advance to that as the next payment due date.
- Consider Deferred Payment Due Dates in Next Payment Due Date Calculation – When this box is not marked, the system will only display due dates based on the normal periodic payments. When this box is marked, the system will look at any outstanding deferred payment due dates as well as the normal periodic payment due dates and will display which ever date happens to be approaching next.
Depending on the state where you are doing business you need to setup your late fee calculations with figured that are considered acceptable in the eyes of the law. YOU are responsible for knowing your state laws and making sure this tool is configured to comply with those laws! When the program is first installed, the options set in this area are defaulted to what is considered acceptable here in California were we first began. These figures may not be considered reasonable in the eyes of the law in your state. You may enter a Percentage of a periodic payment or a dollar amount and then set the system to select either the Greater or Lesser figure depending on your state laws and then finally you may enter the Grace Period or the number of days that the customer is allowed as leeway after the due date before that late fee is applied.
- Add to Account & Pay-Off Balance Only – Use this if you want to add any adjustments (such as late fees) to the account balance and pay-off balance only. In this situation using a similar figure as the previous example of $200.00 per period, the system would still attempt to collect $200.00 at the time of the next payment after the Late Fee was applied, but once the customer had finished satisfying their outstanding principal, they would still be required to make payments until that late balance had also been reduced to zero. If they wanted to pay-off the loan early, the pay-off displayed in their deal will already have this amount included in that balance.
- Add to Periodic Payments – Use this if you want to add the Late Fees to the period payment. For example if a customer was making payments of $200.00 per period and they have $25.00 in outstanding Late Fee’s, the system would attempt to collect $225.00 in the next payment after that late fee was applied.
Automatically Apply Late Fee to Late-Open-In-House Accounts – By marking this box, each morning when DeskManager is opened for the first time by any user, it will trigger an event where DeskManager will go over every open BHPH account and review the most recent due date as compared to the current date. If that account is unpaid and it has passed the Late Fee Grace Period, DeskManager will automatically apply a late fee to that account. After the review has completed, the system will present the user with a message stating the number of accounts and a total of the late fees applied for that day. This information can also be reviewed from the Adjustments Report.
Calculate Late Fees based on – DeskManager has two options to chose from for applying the Late Fee to your accounts. Before selecting an option, you must be familiar with the laws regarding late fees for the state in which you do run your business! You are responsible for selecting an option that is legal for your situation.
- Total Payments Due – This option will use the total payments due figure to calculate the Late Fees applied to each account.
- Periodic Payment – This choice will apply late fees based on a single periodic payment. This is what is legal in most situations, but verify with a source that knows the laws for the state where you run your business!
Allocate Late Fees upon collecting new payment – Selecting this option, DeskManager will automatically have the ‘Includes Late Fee’ box marked whenever you collect a new payment. If the deal has any outstanding late fees, the system will automatically attempt to collect those first, then if there is payment remaining to be distributed, it will next attempt to satisfy the outstanding interest owed and finally it will put any remaining amount towards principal.
Add Late Fees to Late Deferred Payments – Some states allow the dealer to apply late fees to the Deferred Payments also. Marking this box will allow the system to review the dates of the deferred payments of a deal and determine, based on the late fee settings, if the payment has passed the grace period. Deferred Payments that have passed the grace period will have a late fee applied using the same late fee formula as applied to periodic payments. This will continue until the deal’s First Payment Due Date. Deferred Payments will no longer be considered eligible for Late Fees after the deal’s First Payment Due Date has passed.