How to Get Your Finance Company to Lower Your Reserve Rate
When you’re scaling direct-to-consumer sales in the Vehicle Service Contract (VSC) or home warranty space, cash flow is king.
You launch a $100,000 campaign. You pay your mail house and lead vendor on June 1. The mail hits mailboxes on June 10. Responses trickle in through early July. You close sales—but then wait 45 days to get funded, and your finance company holds back 53% as a cancellation reserve.
That’s your growth capital—locked up in a model based on old risk.
So how do you get your reserve rate lowered?
What proof does my finance company need to lower reserve rates?
It starts with data. Most finance companies use your aggregate cancellation rate—but that hides recent improvements. Instead, segment your data by vintage: contracts grouped by month of origination.
Then build cancellation curves to show how those newer cohorts are performing.
If your recent vintages have:
- Fewer early-month cancellations
- Flatter long-term slopes
…then you’ve got the foundation to say:
“Our current book is materially better than the one you’re pricing.”
Can I make the case by finance term?
Absolutely. Structural differences matter. Let’s say your historical book had 18-, 24-, and 30-month payment plans—but the 30-month contracts canceled more frequently.
You can show:
- The overall cancel rate was inflated by 30-month terms
- 18-month plans cancel 10% less
- Your current sales mix is heavily weighted toward 18-month contracts
That gives you a data-backed reason to request a lower reserve on your current book.
Should I segment by more than just time or term?
Yes. Precision matters.
Segment your data by:
- Vintage
- Finance term
- Lead source
- Down payment
Finance companies love predictability. If you can show which cohorts are stable—and which you’ve already phased out—you’re giving them the confidence to adjust reserves accordingly.
Bottom line: how do I unlock that cash?
You’re already waiting weeks to get funded. A 53% reserve on top of that slows growth. But with the right cancellation curves, segmentation, and proof of operational improvements, you can change the conversation—and unlock the working capital you need.
Want help building that case? That’s what we designed the Experience Curve to do.
