Automotive Finance Corp. wants to give independent used-car dealers one less responsibility to juggle.
Through the company's new Retail Alliance Program, Automotive Finance is offering to manage the flow of cash from a dealer's retail lenders to the dealer's floorplan finance companies. In essence, the program eliminates the used-car dealer as the monetary middleman.
Automotive Finance hopes to decrease dealers' risk while increasing their ability to buy more vehicles at wholesale auto auctions. Additionally, it wants to give dealers a reliable presence in the volatile subprime industry.
Automotive Finance, which was founded in 1987, is an Indianapolis provider of floorplanning to independent dealers. It is a sister company of auto auction chain Adesa Corp., also headquartered in Indianapolis, and a subsidiary of Minnesota Power Inc. of Duluth, Minn.
The Retail Alliance Program, which was introduced in November, is available in 11 states. It will be rolled out around the country by the end of March, the company said.
The program is offered only to dealers who are Automotive Finance customers. However, the dealers do not have to use Automotive Finance exclusively. On the retail end, dealers are limited to a consortium of approved lenders.
So far Automotive Finance has signed up three retail subprime lenders for the program: Auto Use of Andover, Mass.; Coast to Coast Automobile Lending Corp. of Montvale, N.J.; and Consumer Acceptance Corp. of Indianapolis.
Brad Todd, Automotive Finance COO, said another eight retail finance companies, including some in Canada, have expressed interest in joining the program.
The program gives small dealers access to stable subprime lenders, Todd said. 'The number of finance companies that dealers want to deal with right now has been limited,' he said.
When a vehicle is sold to a retail customer through the program, Automotive Finance handles the transfer of cash from the retail lender to the floorplan finance company. If the retail loan exceeds the floorplanning costs, the difference is paid to the dealer.
Automotive Finance also oversees the transfer of the vehicle title.
Todd said delays on the retail side of the transaction sometimes force dealers to pay their floorplanning costs out of their own pockets. If a dealer does not make those payments on time, the floorplanner could freeze his account and prevent him from floorplanning additional vehicles.
The Retail Alliance Pro-gram eliminates that possibility and frees up the dealers' funds so they can buy more vehicles at auction, Todd said.
Increased auction sales can mean increased business for Automotive Finance, he said. The program also benefits the company by increasing the likelihood of on-time payments.
Under the program, dealers receive a $75 rebate for every vehicle they sell. They receive an additional $50 rebate if they sell the vehicle with a special 'product warranty' from Wynn's Oil Co. The warranty, similar to a vehicle service contract, is special to the Automotive Finance program.
Sam Haig, director of marketing for Wynn's dealer services division, said the warranty is important to the program's retail finance partners. By keeping the vehicle running, the Wynn's warranty better ensures the retail customer will make the monthly loan payments, Haig said.
R.B. Grisham, executive vice president of the National Independent Automobile Dealers Association in Arlington, Texas, said companies such as Automotive Finance realize their customer base of independent dealers could shrink if those dealers cannot compete with franchised car dealers and used-car superstores.
Said Grisham: 'Now these companies are addressing that issue by providing better services to the independent dealers.'