Subprime lender GO Financial will no longer originate auto loans, company President Colin Bachinsky told Automotive News.
“We’re going to stop the pipeline for new applications,” Bachinsky said.
The lender, of Mesa, Ariz., will verify and fund the deals it has already approved through May 27. GO Financial will keep the servicing team intact through the amortization of its consumers’ loans, which he expects to take four to five years.
The lender began originating auto loans in December 2011. By 2015, GO Financial had 3,000 active dealers, 5 to 8 percent of which are franchised new-car sellers, Bachinsky said.
Investment in other businesses
The move reflects a changed business strategy by GO Financial’s owners Ernie Garcia and Ray Fidel, rather than GO Financial’s performance, Bachinsky said.
“Our owners have decided to move resources and capital to other core business,” which includes DriveTime, a used-vehicle retailer and finance company focused on subprime credit customers; SilverRock Holdings, an F&I product provider; and Carvana, an online used-car retailer.
“GO Financial is profitable, and we’re generating a nice return for the owners,” Bachinsky said. There has been “no deterioration in our portfolio.”
The lender shared the news with its 500 employees on Monday and expected to share it with its dealer clients on Wednesday night.
The company plans to reassign more than 90 percent of its employees to SilverRock, DriveTime and Carvana, which are also headquartered in Arizona, Bachinsky said.
GO Financial’s senior management teams are being scattered across DriveTime, SilverRock and Carvana. Bachinsky will head inventory acquisition and reconditioning functions at DriveTime, he said.
“As the dust settles around the slowing of our originations, I would slowly transition over,” he said. The “No. 1 goal is to minimize our risk with this decision with GO. I will stay along with GO as long as we need. Once we mitigate any sort of risk, I’ll transition to DriveTime.”
GO Financial also had a pooled auto loan program, which allowed dealers to combine their sales and earn a percentage of the total profit. GO Financial will continue to pay dealers who have closed a pool, Bachinsky said.
Cox Automotive stake
This year Cox Automotive announced it acquired a minority interest in SilverRock Holdings. Dealers who worked with Cox Automotive’s NextGear Capital as well as GO Financial were able to offer customers F&I products through SilverRock.
Auction company Manheim, a division of Cox Automotive, had a 49 percent stake in GO Financial, but “we’re in the process of unwinding that relationship,” Bachinsky said. The owners are repurchasing the interest that Cox had in both GO Financial and SilverRock. The repurchase will likely close this month, Bachinsky said.
Brian Geitner, president of Cox Automotive Financial Services and NextGear Capital, said he anticipates that GO Financial’s change will have no impact on Manheim’s business.