Prestige Financial: Growth, minus the blazing guns

Prestige Financial Services of Salt Lake City is among a growing group of independent, subprime auto lenders that are expanding nationwide from a regional footprint.

Aaron Dalton, senior vice president, said Prestige Financial is looking for steady, sustainable growth. The lender now works with dealerships in 40 states, up from 13 in 2010.

Prestige Financial was created in 1994 as the captive finance company for the Larry H. Miller Group of Cos. and is still owned by the Miller group.

Dalton spoke about Prestige Financial's growth strategy with Automotive News Special Correspondent Jim Henry.

A year ago, Prestige Financial was in 25 states. Where do you stand now?

It's going well. We've continued to expand our territory and are now working with dealerships in nearly 40 states.

Lenders have said competition is way up in subprime but still rational. Is that your experience?

By and large, we've held underwriting standards pretty constant but have made some yield concessions in order to remain an active part of the dealer's discussion for the type of credit we're seeking.

We see credit and pricing decisions out there that we wouldn't be comfortable making, but our competitors are working with risk models, institutional histories and other considerations that differ from our own.

So I can't categorically claim that the guy who likes something I don't is "irrational." After all, we buy paper that makes a lot of banks cringe, and it continues to perform for us.

Are you expanding into higher or lower risk tiers?

We're originating paper right now that works well for our risk appetite. We continue to look for opportunities to book different flavors of paper having what we see as similar risk profiles, but we're not looking to make dramatic shifts up or down in overall risk.

Our portfolio is performing very well -- which is characteristic of the space these days and preferable to the alternative -- yet we recognize the role of both internal and external factors on this performance. We also recognize how quickly a series of bad decisions can send things southward, so we're not taking an easy-chair approach to risk or guns-blazing approach to originations.

How about new-vehicle deals vs. used?

The vast majority of what we book continues to be used, with Honda, Toyota, Nissan, Chevy and Dodge representing about two-thirds of what's been coming on the books for the past couple of years. Outside of those top five makes, Ford has been fairly constant, with Hyundai and Chrysler up and down, respectively, from their relative levels of a few years ago.

Is it inevitable that some lender will cut margins below where they make sense and force everyone else to respond?

Competition is certainly robust, which gives dealers and car buyers a wide array of financing options.

As a family-owned business, we're not facing some of the growth pressures that bear on many of our competitors, and we're grateful for that. In their 30-plus years in the industry, the Millers have seen many boom-to-bust financing cycles and legions of "lenders du jour" pass through their dealerships, and they're committed to ensuring that Prestige doesn't become yet another statistic.