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ReprintsCarFinance CEO: Direct loans won't hinder profit
 | CarFinance CEO Jim Landy: "When we approve the customer at $17,000 retail book value, we fund the dealer the 17 grand that day." |
Subprime auto lender CarFinance.com is signing up dealers for a new direct-lending channel. The concept is to take credit applications online directly from customers and refer them to affiliated dealers.
CarFinance, of Irvine, Calif., launched indirect auto lending in May 2011. It already has more than 1,000 dealers signed up for indirect loans. That's where the dealership acts as a middleman.
Historically, direct loans are less profitable for dealers because there may be little or no opportunity to make money on the financing. CarFinance.com is trying to make direct vs. indirect loans "profit-neutral" for dealers, says CEO Jim Landy, 50.
He spoke with Special Correspondent Jim Henry by phone last month.
Has the new direct lending channel launched yet?
We just launched in California. We're in states that represent a combined two-thirds of U.S. volume.
How is your older, indirect loan business doing?
We're licensed in 22 states for direct and indirect. We just now crossed 1,000 dealers we have signed up. We are adding 100 to 150 a month; that is going really well.
The plan is to do both direct and indirect?
We started with indirect in May (2011); we just became active in direct, in December.
We intend to be active in both. Our plan is somewhere around a 20 percent mix. That is indirect will be 80 percent.
What is your volume?
In indirect, we have just over $50 million on the books ... about 2,400 to 2,500 loans. This year we plan to do about $300 million in new originations. We'll probably do about $12 million to $13 million [in January].
What happens when a customer is approved?
If we approve the customer for $20,000, we connect them with a dealer and say, "This customer is approved for $20,000," plus there's room for a $2,000 extended-service contract.
The service contract isn't required, is it?
It's not a prerequisite. It's a feature that we offer. We want the dealer to make money. We want it to be a positive experience for the dealer.
How do you avoid conflict with dealers?
It's much more complementary than conflicting. We want it to be profit-neutral for the dealer. ... Others may be paying a few hundred dollars reserve but there's a few hundred discount. We're not going to do that. When we approve the customer at $17,000 retail book value, we fund the dealer the 17 grand that day.
Do dealers try to shift customers to indirect loans, where they usually expect to make more money?
You certainly are going to have an element of flipping, especially when you get some dealer who doesn't know what it is we're sending him. If a dealer is familiar with us and they've said they want us to send them those leads [for direct loans] ... they're going to respect our relationship with that customer.
You can reach Jim Henry at autonews@crain.com.
