Prestige Financial Services

Partnering with the Right Dealers

Building good relationships with subprime finance companies can turn into lasting partnerships, which prove to be beneficial in tough times. Prestige Financial Services, Inc. is one company that holds a two-way relationship to the highest regard. Scot Seagrave, senior vice president of loan originations at Prestige, emphasized the importance of relationships between finance company and dealer. “Now more than ever, having that relationship with your lenders is invaluable … It’s caring about the performance of your paper, your efficiencies.”

The Salt Lake City, Utah-based subprime finance company has been working with dealers for 15 years. It began as the subprime financing arm of the Larry H. Miller Group dealerships and later expanded beyond the group. The company now works with franchise dealers in 16 states and hopes to eventually expand its reach, but first, said Seagrave, the company would like to increase originations in the states it’s already doing business in. Those states include: Arizona, Colorado, Georgia, Idaho, Illinois, Maryland, Missouri, New Mexico, North Carolina, Oregon, South Carolina, Texas, Utah, Virginia, Washington and Wyoming.

The company is expanding slightly, but not without due diligence. “We are trying to increase our originations here in June, and we did loosen up a little bit … but nothing crazy.” As for signing up dealers, Prestige carefully evaluates each dealership. Seagrave said, “The right dealership is a combination of things. Do they have a subprime department? Do they have the right inventory? Do they have an owner or GM that’s onboard with subprime? Do they believe in the relationship? What are their current efficiencies?”

He added, “Whatever the economy will give us, we’ll take. We will need to expand our dealer base if we want to increase originations a lot more.” Once Prestige has more access to capital, the company will be able to grow its dealer base and originations. Referring to access to capital, Seagrave said, “We’re starting to see some things open up … In the past, you could go to one source to get $250, $350 million. It may take you 10 sources to get that amount of money today.

“It’s still very difficult. However, Prestige has been very fortunate. We [just created relationships with two banks]. We’ve gotten some money from them, and we’re excited by the potential from those two very large banks.” He is also optimistic about cultivating more relationships with new capital sources.

To give dealers better insight into Prestige’s guidelines, Seagrave shared a few facts and figures. First and foremost, all decisions are made by people (not computer programs), and different financing tiers are structured to cater to all levels of subprime customers, including those with bankruptcies. “We have always been buying the open bankruptcies, open 13s or open 7s, or fresh discharges … we’ve got a very strong bankruptcy department.”

Prestige finances new vehicles and pre-owned vehicles, model year 2002 or newer. Typically, it’ll finance a vehicle with up to 65,000 miles, with competitive term options and advance. However, it will finance vehicles with up to 75,000 miles if they’re certain imports (e.g., Honda, Toyota and Scion). Seagrave added that dealers can also get better term options and more advance on these vehicles.

The company likes to keep monthly payments under $600 and payment-to-income at or below 12 percent, although its scorecard will allow for 15 percent. “Loan-to-value is probably more important today than ever,” added Seagrave. However, Prestige’s program doesn’t cap it because the PTI cap and scorecard puts the proper checks and balances in place for LTV. The company also doesn’t have a minimum credit score. The average Prestige customer finances about $15,500 total for a used car that is two or three years old with 35,000 miles or less. “That used car, low mileage is our sweet spot.”

Notable options dealers have with Prestige are free term bumps and the Rate Reduction Program. The free term bump lets dealers add a service agreement to the contract and keep the customer’s payment the same by extending the term six months.

The Rate Reduction Program, said Seagrave, “works great for dealerships that utilize it right. You’re going to have some customers come in that are rate conscious and they don’t want to sign up for the 18, 19, 20 percent.” With this program, as long as customers make their payments on time and keep the vehicle insured, their rate will drop one-half of a percent, up to 2 percent a year, all the way down to 14 percent.

For more information on Prestige Financial Services, call 800.984.6737 or go to www.GoPFS.com.

Vol. 3, Issue 4