The move comes after AFS obtained a $20 million line of credit in June specifically to finance expansion of its business. Seagrave discussed the acquisition with Automotive News Special Correspondent Jim Henry last week.
Competition in subprime lending reportedly is getting brutal.
It's beyond a dogfight. Unfortunately, we're starting to see some of our competitors buying this and that, at prices -- well, we're amazed. Good for them, if they're able to support that, but we decided slow and steady wins the race.
Would you call that type of pricing irrational? Lenders started warning one another about irrational lending almost immediately after auto sales started to improve.
I think you have a lot of private-equity money that entered the space. It's changed the dynamic since 2007, 2008, when it all happened. Private equity is looking for a quicker return.
But, listen, there are some great companies out there. Perhaps they have access to capital cheaper than we do. And good for them! We're rooting for everybody. We think there's enough subprime business for all the good companies.
If our business drops a little bit when somebody goes after business that doesn't make sense for us, we're comfortable with that.
Does the Preferred Automobile Credit Co. buy mean you're moving upscale?
No. PACCO was a unique situation that we took advantage of. We are going to continue to put our product on the shelves. The PACCO move wasn't because it was too competitive in our own arena.
So your new line of credit isn't a war chest to make acquisitions?
No, PACCO is the only one we had on our agenda. And they're just one notch higher than we have been historically.
Did you buy only Preferred Automobile Credit Co.'s loan portfolio, or did you buy the whole business? Will you use PACCO to originate new loans?
We acquired their loans and will service those loans in-house. We buy and hold there. We also purchased their dealer list. ... They've got a lot of dealerships we weren't currently doing business with. We will introduce them to our current program. We want to continue to do some of the things PACCO was doing for them and hopefully add some as well.
How are your offerings different? Are they a different risk tier?
We have been predominantly subprime and deep subprime. The PACCO acquisition and scorecard acquisition allow us to potentially go upstream just a little bit.
What's your credit score range?
Our bread and butter has been that 560-and-under range. What PACCO allows is more like the 560 to 620 range. ... We have always bought 560 and below and we are going to continue to do that.
How many states are you in? How many dealerships?
We've been licensed in 28 states. Now it's 30. But there's licensed, and then there's active. We're probably active in about half of those. ... With the new line of credit we increased staff on the sales side. Now we're really going to go after about 22 of those states.
I think that the latest move is going to take the number of dealerships from about 750 to 800 today to about 1,100 to 1,200 dealerships. That's about 50-50 franchised and independent.
Are you confined to one region, for instance, the Southeast, since you're based in Florida?
Actually we're not that big in Florida. We're all over, except we're not in New England. But from Florida to Pennsylvania we're there, and every state in between. In the middle part of the country we're from Texas to Illinois. In the West, we're in Arizona, California, Washington, Oregon and New Mexico. If you made a list of the top 30 cities in the country, we would pretty much be there.
Do you plan to add more states or grow where you are?
Our primary focus is going to be gaining more market share in our existing states.