Local knowledge and personal relationships are especially important in the subprime sector, says Bill Jensen, Chase custom finance executive.
In contrast, the prime-risk sector lends itself to fewer, more centralized offices that can make more automated decisions, Jensen says. Since margins are fatter in subprime loans, there is less pressure for that type of instant, impersonal efficiency in subprime loans.
"We think that we can do a better job (in subprime) and obtain better results both for the dealers and ourselves with an underwriting team and a collections team right in the market," he says.
The new Chase offices are in Des Moines, Iowa; Richmond, Va.; and Pittsburgh. Jensen says that as the bank's share has grown, it has become harder, for example, to run the subprime business for Pittsburgh and western Pennsylvania from the Chase office in Philadelphia.
"People in Pittsburgh would rather do business with Pittsburgh, and Philadelphia would rather do business with Philadelphia," he says.
The bank already has 41 offices dedicated to "custom finance," its term for subprime. With three more, it will have 44. There are no job cuts planned for the existing offices, Jensen said. In Pennsylvania, splitting the state without cutting jobs in the existing office will free up the staff in Philadelphia to do a better job there, too, Jensen says.
Chase is the nation's biggest new-vehicle lender, but it's also No. 2 in used-vehicle lending, behind Wells Fargo Dealer Services, according to Experian Automotive.
Chase's used-vehicle market share was 4.7 percent for loans originated in the first quarter of 2010; up 24 percent from the year-ago quarter, Experian says.
The Des Moines and Pittsburgh offices opened in May. The Richmond office opened earlier this month.
"We're living the economy there, we're investing in the market, we know who the dealers are," Jensen says. "The dealers like having us in the market, and we feel like they reward us with more business because we're in the market."