Credit clinics are about selling, helping

Dealer Rich LaLonde: "Our passion is to help people with their credit."
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Detroit-area auto dealer Rich LaLonde hopes to boost vehicle sales by offering high-risk consumers a new service: credit counseling.

Last month LaLonde held a weeklong series of free credit clinics at his two Kia stores. The 120-plus people who attended the sessions at Summit Place Kia of Waterford, Mich., and Summit Place Kia of Mount Clemens, Mich., received one-on-one credit counseling, he says.

On hand were LaLonde, representatives from financial institutions and a credit-repair specialist available for hire in case an attendee wanted to dispute claims with the credit-rating agencies.

LaLonde says one goal of the clinics was to sell cars. But he says consumers also need a comfortable place to discuss their credit problems. He says he hopes they will remember the service when they are in a position to buy a vehicle.

"These people get lied to all the time," LaLonde says of sales pitches. "They're told that if they come in, their financing will be approved or that they'll get great rates. Then they drive 45 minutes and there's nothing there for them.

"Our passion is to help people with their credit. Sometimes their expectations are too high."

Subprime borrowers are in the spotlight across auto retailing as lenders become increasingly more willing to accept lower credit scores and dealers look to keep the annual U.S. vehicle selling rate above 15 million units. According to Experian Automotive, 36 percent of outstanding auto loans in the third quarter this year were subprime.

LaLonde is hardly alone among auto dealers interested in combining consumer credit rehabilitation with car sales.

Karl Malone Toyota in suburban Salt Lake City plans to open what it calls a Credit Rebound Center next year, says Andy Madsen, CEO of Karl Malone Group.

The $2.5 million used-car showroom and offices will offer subprime buyers credit advice in an upscale atmosphere featuring leather furniture, an aquarium, music and refreshments, Madsen said.

Credit rebab
Consumers with troubled credit got this advice at a dealership-sponsored credit clinic.
1. Buy a car you can afford.
2. Make payments on time for 12 to 18 months.
3. Come back and get refinanced or step up to different vehicle.

Malone, an NBA Hall of Famer, grew up in poverty in Louisiana and wants to see down-on-their-luck people get a fresh start in life, Madsen said. The store sells about 420 new and used vehicles per month.

"Karl wants to see the underdog succeed," Madsen said.

LaLonde said subprime shoppers have traditionally accounted for an outsized portion of sales at his Kia stores. About 30 percent of loans at the stores are subprime, which LaLonde defines as credit scores below 620. His Waterford store sells about 100 new and used vehicles a month, while the Mount Clemens store retails 60 to 70 vehicles.

Though dealerships and their lenders are catering to more subprime buyers these days, LaLonde believes people with bad credit are still underserved by the industry.

He has an additional perspective from his ownership of Auto Credit Express, a major supplier of third-party finance or credit leads to auto dealerships. A finance lead is generated when a shopper, usually with subprime credit, visits the Auto Credit Express Web site and leaves contact information or fills out a credit application.

LaLonde says the Kia stores sold more than 30 vehicles to the people who attended the credit clinics. The stores also received referral business from attendees who told others about their experience, he says.

He said the message to clinic attendees was to get in a car they could afford, make payments on time for a year to 18 months, then come back and see whether they could get refinanced or step up to a different vehicle. Said LaLonde: "They met with professionals interested in getting them on the road to recovery."

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