Newsmakers – 8 Sales Dynamics – 10 Startups – 6

TH E I N S I D E R ’ S G U I D E TO A U TO L E N D I N G & L E A S I N G O P P O R T U N I T I E S
J U N E 6 , 2 0 1 1 õ s õ V O L . 1 4 , N O . 1 4 s õ W W W. A U T O F I N A N C E N E W S . N E T
WITH COMPETITION RETURNING,
LOOSER CREDIT TERMS AND LOWER RATES
ARE SQUEEZING LENDER MARGINS
Page 4
Startups – 6
The lowdown on Triad founder
Jim Landy’s new venture
Newsmakers – 8
General Motors Financial pilots
floorplan finance program
Sales Dynamics – 10
Factoring the auto bailout into
the 2012 election equation
S TARTUPS
TRIAD FOUNDER LANDY FORMS NEW COMPANY TO FILL VOID IN NONPRIME SPACE
7…i˜Ê̅iÊVÀi`ˆÌÊVÀˆÃˆÃʅˆÌʈ˜ÊÓään]Ê̅iʘœ˜«Àˆ“iÊ>Õ̜ʈ˜`ÕÃÌÀÞÊ
got hammered. Finance companies with multi-billion-dollar
portfolios suffered staggering losses because the capital
markets had frozen. And startups eyeing golden
profits based on the loosey-goosey lending of
ÓääÈÊ>˜`ÊÓääÇÊL>ÀiÞÊ}œÌʜvvÊ̅iÊ}ÀœÕ˜`°Ê
Since then, the nonprime sector has been slowly
recuperating. A handful of companies have ramped
up operations, and capital is trickling back. But
with the volume of customers in the space
growing, there’s a notable void.
In the first quarter, the share of new-car loans
“>`iÊ̜ÊVÀi`ˆÌ‡V…>i˜}i`ÊVœ˜ÃՓiÀÃÊ}ÀiÜÊ££°£¯]Ê
according to Experian Automotive. The share of
œ>˜ÃÊ̜ʘœ˜«Àˆ“iÊVÕÃ̜“iÀÃÊÀœÃiÊ̜ʣä°È¯Êˆ˜Ê̅iʵÕ>ÀÌiÀÊ
vÀœ“Ê™°n¯Êˆ˜Ê̅iÊ«ÀˆœÀ‡Þi>ÀÊ«iÀˆœ`]Ê܅ˆiÊ̅iÊÃÕL«Àˆ“iʓ>ÀŽiÌÊ
Vˆ“Li`Ê̜ÊÈ°Ó¯ÊvÀœ“Êx°Ç¯°Ê/…iÊ>ÛiÀ>}iÊLœÀÀœÜiÀÊVÀi`ˆÌÊÃVœÀiÃÊ
vœÀʘiÜÊÛi…ˆViÃÊÜ>ÃÊÇÈÈʈ˜Ê̅iÊwÀÃÌʵÕ>ÀÌiÀÊpÊ̅iʏœÜiÃÌÊ
>ÛiÀ>}iÊÃVœÀiÊȘViÊÞi>Ài˜`ÊÓään°
With those market dynamics in place, seasoned auto finance
veteran and Triad Financial Corp. Founder Jim Landy looked
to capitalize on an opportunity. Together with a team of
former Triad executives and backed by funds from boutique
investment bank Perella Weinberg Partners, last month Landy
launched a new nonprime auto finance venture, called
CarFinance Capital LLC. The Irvine, Calif.-based company
will initially operate on the West Coast, with plans to expand
to Texas this month and nationwide by yearend.
Two weeks into the venture, CarFinance Capital had seven
sales reps servicing 100 dealers in California. It had funded a
handful of deals, Landy told Auto Finance News. The goal, though,
is to debut a direct-to-consumer refinance product in the third
quarter, and to originate $100 million of loans by yearend.
For now, the strategy is to target consumers from “just below
where prime banks lend today, to the mid-500 [credit score
range],” he said. By Landy’s estimation, one in three consumers
fits that description these days.
In a nutshell, CarFinance Capital is striving for a “dealerfriendly” program, that is, “one that gives the dealer a lot of
options with the nonprime consumer,” he said.
To start, the company’s underwriting process will be largely
manual. “We are not employing a very heavily automated process,”
Landy said. “All applications are being approved or declined
LÞÊ>ʏœ>˜ÊœvwViÀ°Ê"ÛiÀÊ̈“i]ÊÜiÊ܈ÊÃÌ>ÀÌÊwÌiÀˆ˜}ʜÕÌÊ̅iÊ`iVˆ˜ið»Ê
In order to secure dealer business, CarFinance Capital will
have to be “predictable” in how it makes decisions, Landy said.
ºvÊ̅iÀi½ÃÊܓiœ˜iʈ˜Ê>Ê`i>iÀň«Êœ˜Ê>Ê-՘`>Þʘˆ}…ÌÊ>ÌÊÇÊ«°“°]Ê
the dealer needs to know that [we’ll offer] the same [financing]
decision tomorrow as we did last week.”
"˜Ê>ÛiÀ>}i]Ê
>Àˆ˜>˜ViÊ
>«ˆÌ>½ÃÊLÕȘiÃÃÊ܈ÊVœ“iÊvÀœ“Ê
franchise dealerships. Average loan amounts will hover around
6
Auto Finance News AutoFinanceNews.net
f£n]äääÊvœÀÊÌܜ‡Þi>À‡œ`ÊÛi…ˆViðÊLœÕÌÊÓä¯Êœvʏœ>˜ÃÊ̅iÊ
company books will be for new cars. “It’s pretty consistent with
the product we’ve been successful with in the past,” he said.
With so many auto financiers focusing on dealer
relationships these days, CarFinance Capital plans
to differentiate itself by ensuring that its field reps
>ÀiÊ>V̈Ûi°Êºi>iÀÃÊ>ÀiÊÀi>Þʅ՘}ÀÞÊvœÀÊ
somebody working with them, somebody who
will return their calls and talk through a particular
credit situation.”
To that end, the company empowers its loan
officers to make decisions and to put transactions
Jim Landy
̜}i̅iÀ°Êº"ÕÀÊ}œ>ÊˆÃʘœÌÊ̜ÊLiÊ̅iÊwÀÃÌÊV>]ÊLÕÌÊ̜Ê
be the best call,” he said.
In fact, next month CarFinance Capital plans to expand its
loan-structure options using an analytical tool from DealerTrack.
“It will give the dealers up to 20 different structuring options”
on any given callback, he said.
TEAMING UP
Though Landy and his executive management team run the
company’s day-to-day operations, Perella Weinberg owns a
controlling interest in the company. The two paired up after
being introduced toward the end of last year.
Continued on page 8
Who’s Who
CARFINANCE CAPITAL’S SENIOR EXECUTIVES
CEO: Jim Landy, formerly chief executive of Triad Financial
œÀ«°]Ê܅ˆV…Ê…iÊvœÕ˜`i`ʈ˜Ê£™n™Ê>˜`Ê}ÀiÜʈÌʈ˜ÌœÊœ˜iʜvÊ̅iÊ
>À}iÃÌʘœ˜«Àˆ“iÊ>Õ̜Êw˜>˜ViÊVœ“«>˜ˆiÃʈ˜Ê̅iÊVœÕ˜ÌÀÞ°ÊiÊ
continued to lead Triad after it was bought by Ford Motor Credit
Co. in 1995, and developed RoadLoans.com as one of the first
œ˜ˆ˜iÊ«ÀœÛˆ`iÀÃʜvÊ>Õ̜Êw˜>˜Vi°ÊœÀiÊÀiVi˜ÌÞ]Ê>˜`ÞÊÃiÀÛi`Ê>ÃÊ
"ʜvÊFireside Bank.
COO: Dennis Morris, formerly an executive vice president at
ˆÀiÈ`iÊ>˜ŽÊ>˜`ÊÃi˜ˆœÀÊۈViÊ«ÀiÈ`i˜ÌʜvÊ/Àˆ>`ʈ˜>˜Vˆ>°ÊœÀÀˆÃÊ
has more than 20 years’ experience in auto finance, which includes
executive roles with manufacturer captives, large banks, and
independent finance companies.
CFO: Jeff Butcher, was most recently vice president and
controller at Santander Consumer USA, and formerly chief
financial officer of Triad Financial. Butcher’s finance experience
ˆ˜VÕ`iÃÊ£{ÊÞi>ÀÃʈ˜Êi>`iÀň«ÊÀœiÃÊ>ÌÊ>Õ̜Êw˜>˜ViÊVœ“«>˜ˆiÃ]Ê
plus a decade of accounting at KPMG.
CCO: John O’Dowd was previously chief credit officer of
Fireside Bank. In his 20 years in the financial services industry,
"½œÜ`ÊÃiÀÛi`Ê>ÃÊ`ˆÀiV̜ÀʜvÊVÀi`ˆÌÊÀˆÃŽÊ“>˜>}i“i˜ÌÊ>ÌÊ/Àˆ>`Ê
and credit risk manager for a captive motor company, among
other roles.
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p°°
June 6, 2011
S TARTUPS
N EWSMAKERS
Continued from page 6
“We have been looking for the right management partners in
the space over the past year,” said Andrew Dym, a partner at
Perella Weinberg Partners and a member of the Asset Based
6>ÕiÊÃÌÀ>Ìi}Þʈ˜Ê̅iÊVœ“«>˜Þ½ÃÊÃÃiÌÊ>˜>}i“i˜ÌÊÕȘiÃðÊ
“We were very familiar and comfortable with the space. When
we got introduced to Jim, we were very impressed with his
industry knowledge, background and history.”
*ÕÌÊȓ«Þ]Ê>˜Êˆ“«œÀÌ>˜ÌÊÀœiÊ̅>ÌÊ̅iÊÃÃiÌÊ>Ãi`Ê6>ÕiÊ
ÃÌÀ>Ìi}ÞÊ«>ÞÃʈ˜Ê̅iÊ«>À̘iÀň«ÊˆÃʜ˜Ê̅iÊw˜>˜Vˆ˜}ÊÈ`i°ÊޓÊ
and his colleagues have contacts that reach “far into the bank
>Ài˜>ÊpÊw˜>˜Vˆ>Êˆ˜Ã̈ÌṎœ˜ÃÊ>˜`ʈ˜ÛiÃ̓i˜ÌʅœÕÃiÃÊ̅>ÌÊV>˜Ê
provide capital and help issuers raise money,” he said. “We
have that expertise and that contact base to call on to help
support the business.”
ÃÊ̅iÊVœ“«>˜ÞÊ}iÌÃʜvvÊ̅iÊ}ÀœÕ˜`]Ê̅iÊÃÃiÌÊ>Ãi`Ê6>ÕiÊ
strategy will provide the equity capital for CarFinance to
originate loans. As the company grows, that strategy will
change. “When the timing is right, we will bring in a bank
partner with the right terms and conditions. That will
eventually lead to term securitizations with the participation
of institutional investors.”
p°°
Visit us online at
in the lanes
on the lot
GENERAL MOTORS CAPTIVE TO LAUNCH
FLOORPLAN PILOT PROGRAM
General Motors Financial Co. is nibbling at the edges of Ally
Financial Inc.’s floorplan business.
The General Motors Co. captive plans to start financing dealers’
ˆ˜Ûi˜ÌœÀˆiÃÊLÞÊÞi>Ài˜`]Ê܈̅Ê>Ê}œ>ÊœvÊ«ÀœÛˆ`ˆ˜}Ê£ä¯Ê̜ÊÓä¯Ê
œvÊÊ`i>iÀýÊyœœÀ«>˜Êœ>˜Ãʺ܈̅ˆ˜Ê>ÊÞi>ÀʜÀÊÌܜ]»ÊÃ>ˆ`ÊÊ
Financial President and Chief Executive Dan Berce at an
Automotive Press Association lunch. Ally has been providing
Ê`i>iÀýÊyœœÀ«>˜ÃÊȘViÊÓää™]Ê>ÃÊ«>ÀÌʜvÊ̅iʓ>˜Õv>VÌÕÀiÀ½Ã
bankruptcy restructuring plan.
Since acquiring AmeriCredit Corp.
last year as the foundation for a
V>«ÌˆÛi]Êʅ>ÃÊLii˜ÊiÝ«>˜`ˆ˜}Ê̅iÊ
unit’s offerings. In the first quarter,
ʈ˜>˜Vˆ>ÊœÀˆ}ˆ˜>Ìi`Êf£°£ÊLˆˆœ˜Ê
œvʏœ>˜ÃÊ>˜`ÊfΣ£Ê“ˆˆœ˜Êœvʏi>ÃiÃ]Ê
Õ«ÊvÀœ“Êf™Îxʓˆˆœ˜Ê>˜`Êf££Ê
million, respectively, in the fourth
quarter of 2010.
The captive’s primary push to grow
ʈ˜>˜Vˆ>ÊˆÃ˜½ÌʏœœŽˆ˜}Ê
to displace Ally, but is
ˆÌÃÊÅ>ÀiʜvÊÊÛi…ˆViÊw˜>˜Vˆ˜}ʅ>ÃÊ
aiming to grow its share
taken the form of a leasing program,
܈̅ÊÊ`i>iÀð
for which it has secured a $600
million warehouse facility. The initial program debuted in
"…ˆœÊ>ÃÌÊiVi“LiÀÊvœÀÊVÕÃ̜“iÀÃÊ܈̅ÊVÀi`ˆÌÊÃVœÀiÃʜvÊÈnäÊ
or higher. Since then, the pilot has been rolled out in multiple
at the bank
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Auto Finance News AutoFinanceNews.net
June 6, 2011