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Loan aggregator profile VI: Open Dealer Exchange

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Luyckx: "We are the new guy on the block. We don't have market share to protect."

Trying to break into automotive financing in the middle of a major credit crisis doesn't seem like a winning strategy. But Steve Luyckx, general manager of Open Dealer Exchange, thinks his startup company has a fighting chance.

"We're going in with a different value proposition," Luyckx said.

Open Dealer Exchange, launched in January 2009, is a new- and used-car loan originator and aggregator. It is owned by Automatic Data Processing and Reynolds and Reynolds Co., which together supply about 85 percent of stores with dealership management systems.

Open Dealer Exchange's advantage, Luckyx says, is that it works directly through the dealership management system. "Think of us as providing the pipe where the data can go from the DMS directly to the finance source," he says.

In the Open Dealer Exchange system, the entire loan application process -- from receiving the application to filing the contract electronically -- is done through a single point of sale. Throughout the process, the information is checked and corrected.

Dealers pay nothing for the service; lenders are charged when a loan is actually approved. The pricing grid is disclosed only to lenders under a nondisclosure agreement, Luyckx said.

Using a single point of sale is more efficient -- transactions take seconds -- and more accurate, said Marty Zwolen, Open Dealer Exchange's vice president of sales and marketing. Up to half the time, lenders can't process a loan application because of errors, he said.

Open Dealer Exchange's method of charging when a loan goes through rather than per application could be an advantage, said Paul Cuevas, director of automotive finance at J.D. Power and Associates. Competitors such as DealerTrack. charge a lender for each credit application, regardless of the outcome.

Opportunity

"From a lender's perspective, it left an opportunity for a new company," Cuevas said.

But depending on Open Dealer Exchange's pricing structure, DealerTrack still may be a better deal, he said. At DealerTrack, lenders with more than 100,000 applications a month pay $1.50 per application, compared with $3 for smaller-volume users.

Cuevas said Open Dealer Exchange also faces the chicken-and-egg issue: How to get dealers to sign up for a system without a broad base of lenders, and how to get lenders to use a system that dealers aren't asking for.

Persuading lenders to work with Open Dealer Exchange has been his biggest challenge, admitted Luyckx, 47, who previously worked for DaimlerChrysler Financial Services Americas. "Our progress with the lenders is slower than we would have liked," he said.

Privately owned Open Dealer Exchange won't reveal how many lenders or dealers it works with or how many loans it handles per month. They are primarily new-car loans right now, Luyckx said.

Open Dealer Exchange has announced ties-ups with BMW Group Financial Services, Westlake Financial Services and Automatic Credit Corp.

Luyckx said he is "engaged" with the top 100 lenders. Among large lenders, Ally Financial and Ford Motor Credit Co. say they are not doing business with Open Dealer Exchange.

Open Dealer Exchange isn't profitable yet, but it is looking to expand into the credit bureau business. And in February it purchased the Provider Exchange Network from MenuVantage. The Provider Exchange Network allows providers of products such as service contracts, extended warranties and insurance to transmit rates and contracts directly to dealers.

Said Luyckx: "We are the new guy on the block. We don't have market share to protect. It's an opportunity."

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