Subprime lender Prestige Financial Services has begun letting consumers refinance their vehicles directly, bypassing the dealership. The initiative is part of an effort to expand the company's auto-lending portfolio. But it illustrates how the Internet can challenge today's indirect-lending business model.
Most of the company's loans still come indirectly through dealerships, but over the past year, the company has expanded its lending portfolio to include direct-to-consumer loans.
"With technology, consumers can find ways to seek out a loan, get approval and not get embarrassed by going into a dealership to be told they're not qualified," Bryant Henrie, president of Prestige, told Automotive News this month.
If consumers have a loan with a higher interest rate because of a weaker previous credit score, they can go online and Prestige will refinance them, Henrie said.
But Prestige, an affiliate of the Larry H. Miller Group of Cos., still relies on its dealer clients. The company has been an indirect lender for 21 years. "That is our core business. We will never stray from that," Henrie said.
There is no dealer reserve on direct-to-consumer loans because the dealer is uninvolved. Consumers receive the wholesale rate, Henrie said.
Prestige has been issuing direct loans for about a year. It has put about 200 direct loans on the books, all involving vehicle loan refinancing, Henrie said. But that's a thin slice of Prestige's auto lending business. The company issues more than 25,000 auto loans a year, Henrie said.
There is no benchmark goal in growing the direct-loan portfolio, Henrie said. "It's another way to grow the company. If you don't grow, you become stagnant or irrelevant."
Prestige has used direct mailers to contact consumers who may want to refinance, but Henrie says the company eventually will contact consumers through social media.