As much as subprime auto lending has grown in the past couple of years, Gary Lorenz is betting there's room for it to grow.
Lorenz, 53, is the former president of Wells Fargo Auto Finance, which he left in 2008. He's now CEO of Global Lending Services, a newly launched subprime lender based in Atlanta. Earlier this year, the new company purchased an existing lender, Resurgent Auto Finance of Greenville, S.C.
Lorenz spoke with Automotive News Special Correspondent Jim Henry.
Subprime has been in recovery mode for a couple of years now. Is there room for more players?
It's such a big market. If you look prerecession, there were some big players like CitiFinancial and HSBC. Those companies don't exist any more. The landscape is much more fragmented today. The big banks aren't doing as much in subprime.
(Note: Dallas-based Santander Consumer USA bought HSBC Auto Finance Inc.'s subprime loan portfolio in two transactions, in 2009 and 2010. Also in 2010, Santander bought $3.2 billion in loans originated by CitiFinancial Auto Ltd., took over servicing its entire portfolio of about $10 billion, and also took over CitiFinancial's staff and facilities.)
Delinquencies are at or near record lows. What does that mean for dealers?
Delinquencies are on the low side. From a dealer perspective, that means there are going to be opportunities for them. It's a good thing for companies like ours that are entering the market.
The better the lenders do -- the lower the losses are for lenders -- the more loans we're willing to make, the better terms we can offer customers, the better terms we can offer dealers. It's a great thing for dealers.
The company you're starting is based on an existing company that was lending to independent used-car dealers. How tough will it be to switch to franchised new-car dealers?
Our focus is going to be the franchised dealers. The company we acquired, Resurgent, was operating in four states. They were doing 75 percent of their business with independent dealers and 25 percent with franchised dealers. A year ago they were about 50-50, but as competition increased, it slanted that business.
As we roll out to new states and enhance our products with existing states, we will still have the independent dealers, but we feel it will expand very quickly with franchised dealers to 50-50, then in the midterm to 75 percent franchised and 25 percent independent.
Can you describe your background with Wells Fargo?
With Wells Fargo my career indirectly went back 23 years, back to a privately held company in subprime, Community Credit Co. in Edina, Minn., that was acquired by Norwest in 1994. Norwest and Wells Fargo merged and it became part of Wells Fargo.
With Wells Fargo we had about 20,000 dealers in the U.S. and Canada. In 2006, we were the largest noncaptive finance company.