Automatic lease residual management system

• US 6,502,080 B1
• Filed: 08/31/1999
• Issued: 12/31/2002
• Est. Priority Date: 08/31/1999
• Status: Expired due to Term

• Current Assignee: The Chase Manhattan Bank (JP Morgan Chase & Co)
• Original Assignee: The Chase Manhattan Bank (JP Morgan Chase & Co)
• Inventors: Osei-Agyemang, Simon, Leibovic, Marc, Eichorst, Michael, Tam, Steven S., Blank, Randal E., Ren, Jiang, Ghosh, Ulf K.
• Primary Examiner(s): Trammell, James P.
• Assistant Examiner(s): Greene, Daniel L.
• Application Number:
  US09/387,669
• Time in Patent Office: 1,218 Days
• Field of Search: 705/400, 705/4, 705/38
• US Class Current: 705/400
• CPC Class Codes: G06Q 30/0283 Price estimation or determination
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03

Abstract

A method of predicting a net reserve for a vehicle leased by a lessee from a lessor in accordance with a lease, the method comprising the acts of: predicting a market value loss of the vehicle at a scheduled maturity date of the lease, the predicted market value loss being a function of: (i) a probability that the vehicle will be returned to the lessor after the lease; (ii) at least one predicted price at which the vehicle may sell after the lease; and (iii) a residual value of the vehicle, the residual value being an aggregate of at least a projected price of the vehicle at the scheduled maturity date made prior to the lease and an enhancement amount; and obtaining the net reserve of the vehicle as a function of the predicted market value loss.

Claims

1. A method of predicting a net reserve for a vehicle leased by a lessee from a lessor in accordance with a lease, the method comprising the acts of:

predicting a market value loss of the vehicle at a scheduled maturity date of the lease, the predicted market value loss being a function of;

(i) a probability that the vehicle will be returned to the lessor after the lease;

(ii) at least one predicted price at which the vehicle may sell after the lease; and

(iii) a residual value of the vehicle, the residual value being an aggregate of at least a projected price of the vehicle at the scheduled maturity date made prior to the lease and an enhancement amount; and

obtaining the net reserve of the vehicle as a function of the predicted market value loss.

2. The method of claim 1, wherein the net reserve of the vehicle corresponds to a difference of a reserve amount and the predicted market value loss, the reserve amount being a function of the product of:

(i) the probability that the vehicle will be returned to the lessor; and

(ii) the enhancement amount.

3. The method of claim 1, wherein the at least one predicted price at which the vehicle may sell after the lease is a function of at least a depreciation of the vehicle during the lease.

4. The method of claim 3, further comprising the act of:

establishing an equation for predicting respective prices P(t) at which the vehicle will sell as a function of the depreciation of the vehicle at particular times (t).

5. The method of claim 4, wherein the equation for predicting prices is in accord with the following expression:

P(t)=α

*t+k, where α

*t represents the depreciation of the vehicle as a function of time and k represents the value of the vehicle at a predetermined time.

6. The method of claim 5, wherein k represents the value of the vehicle in the August of the year following the vehicle'"'"'s model year.

7. The method of claim 5, wherein k is substantially an actual auction value of the vehicle obtained from the Black Book listing of vehicle values.

8. The method of claim 5, wherein k is from about 95% to 98% of a price paid by the lessor of the vehicle to obtain ownership thereof.

9. The method of claim 8, wherein k is about 96.8% of the price paid by the lessor to obtain ownership of the vehicle.

10. The method of claim 5, wherein the predicted market value loss of the vehicle is a function of an expected value of the vehicle at the scheduled maturity date.

11. The method of claim 10, wherein the expected value of the vehicle is an aggregate of:

(i) a product of the predicted price P(t) of the vehicle at the scheduled maturity date and a probability that the lease will terminate at the scheduled maturity date; and

(ii) a product of the predicted price P(t) of the vehicle at a time other than the scheduled maturity date and a probability that the lease will terminate at that time.

12. The method of claim 11, further comprising the acts of:

obtaining probabilities that the lease will terminate at;

(i) the scheduled maturity date, and (ii) a plurality of times subsequent to the scheduled maturity date;

obtaining predicted prices P(t) for the vehicle at the scheduled maturity date and the plurality of times subsequent thereto;

obtaining products of the respective probabilities and predicted prices for the vehicle; and

obtaining the expected value of the vehicle by aggregating the respective products.

13. The method of claim 11, wherein the plurality of times subsequent to the respective scheduled maturity date include at least one time in each of a plurality of subsequent months from the scheduled maturity date.

14. The method of claim 13, wherein the plurality of times includes one time in each of about four subsequent months from the scheduled maturity date.

15. The method of claim 12, further comprising the acts of:

obtaining a used car consumer price index (CPI) representing expected market conditions for the sale of the vehicle at the scheduled maturity date; and

adjusting the expected value of the vehicle as a function of the CPI.

16. The method of claim 15, wherein the used car (CPI) is obtained from at least one of:

a consumer confidence index, new vehicle sales information, new car affordability by consumers, and a lease share of total consumer vehicle credit.

17. The method of claim 11, wherein the predicted market value loss for the vehicle is a function of the residual value and the expected value of the vehicle.

18. The method of claim 17, wherein the predicted market value loss for the vehicle is a difference of the residual value and the expected value of the vehicle.

19. The method of claim 15, wherein the predicted market value loss for the vehicle is a function of the residual value and the adjusted expected value of the vehicle.

20. The method of claim 19, wherein the predicted market value loss of the vehicle is a difference of the residual value and the adjusted expected value of the vehicle.

21. The method of claim 1, wherein the predicted market value loss of the vehicle is adjusted to obtain a predicted return market value loss (RMVL) of the vehicle which results from elapsed time between termination of the lease and sale of the vehicle.

22. The method of claim 21, wherein the predicted return market value loss (RMVL) of the vehicle is an aggregate of the predicted market value loss (MVL) and a term which includes at least one of:

(i) the manufacturers suggested retail price (MSRP) of the vehicle;

(ii) a prediction of depreciation of the vehicle resulting from the elapsed time between termination of the lease and sale of the vehicle;

(iii) a probability (PR) that the vehicle will be returned to the lessor by the lessee at termination of the lease; and

(iv) a probability (PM) that termination will occur at the scheduled maturity date.

23. The method of claim 22, wherein the predicted return market value loss (RMVL) corresponds to the following equation:

24. The method of claim 23, wherein the probability of return (PR) is a function of at least one of:

(i) the MVL;

(ii) a state (ST) in which the lease originated;

(iii) the vehicle'"'"'s model (M);

(iv) the lessee'"'"'s income (INC);

(v) the predicted depreciation (D) of the vehicle;

(vi) the lessee'"'"'s savings balance (SAV);

(vii) the lessee'"'"'s credit risk (R);

(viii) a number of loans per household (L) for those having the lessee'"'"'s demographic profile;

(ix) the vehicle'"'"'s loan to value ratio (LTV);

(x) the vehicle'"'"'s color (C);

(xi) the vehicle'"'"'s book month (B);

(xii) the reserve amount (RA);

(xiii) the lessee'"'"'s depth of credit experience (DC); and

(xiv) a ratio of the MVL and the residual value (MVL/RV).

25. The method of claim 24, wherein the probability of return (PR) is in accord with the following equation:

26. The method of claim 23, wherein the predicted market value loss is a function of at least one of:

(i) the return market value loss (RMVL);

(ii) a purchase market value loss (PMVL); and

(iii) miles and damage (M&

D).

27. The method of claim 26, wherein the predicted market value loss is in accord with the following expression:

MVL=RMVL+PMVL−

M&

D.

28. The method of claim 27, wherein the PMVL is a predetermined percentage of RMVL.

29. The method of claim 28, wherein the PMVL is about 15% to 22% of RMVL.

30. The method of claim 27, wherein the lessor has a plurality of leased vehicles, the method further comprising the acts of:

obtaining a net reserve for each vehicle; and

aggregating the net reserves to obtain a reserve position on the plurality of leased vehicles.

31. The method of claim 23, further comprising the act of:

assigning a value for the elapsed time for the vehicle between the termination and the sale.

32. The method of claim 31, wherein the elapsed time is a number of months between the termination and the sale.

33. The method of claim 32, wherein the number of months is selected from 0 months to about 4 months.

34. The method of claim 32, wherein the value for the elapsed time is selected as a function of probabilities that the vehicle will be sold at the termination month and subsequent months.