Automotive News -- January 18, 2012 - 10:40 am ET
UPDATED: 1/18/12 3:00 p.m. ET
Dietrich: "At the right LTV (loan-to-value) and the right structure, you can lend to customers with challenges."Editor's note: An earlier version of this story gave an incorrect former title for Kyle Dietrich, assistant vice president of sales and marketing for Westlake Financial Services. He is a former vice president for WFS Financial Services.
Subprime auto loans are on the upswing and so is Westlake Financial Services, a subprime auto lender owned by Hankey Group in Los Angeles.
Westlake got its start in 1978 as the buy-here, pay-here division of Hankey Automotive Group. Today Westlake buys contracts from more than 13,000 new- and used-car dealerships in 49 states, says Kyle Dietrich, assistant vice president of sales and marketing.
Dietrich, who joined Westlake in 2009, says the lender grew most notably by sticking to what it does best -- servicing credit-challenged customers.
He spoke with Special Correspondent Jim Henry last week.
Your Web site notes that business grew 30 percent last year. How did you do it?
Actually, it was 32.19 percent growth. It was significant growth.
What did you do differently?
I was a vice president at WFS Financial and I was a vice president at Triad. I've seen rapid growth and I've seen rapid declines. In the haze of 2005, 2006, 2007, it was hand-to-hand combat for the banks for every deal. I saw rates drop and deals getting done that probably shouldn't have got done. Everyone was fighting for the same customer.
Meanwhile, Westlake stayed very consistent. At the right LTV (loan-to-value) and the right structure, you can lend to customers with challenges.
What happened to everybody else?
My old company shut down. [Triad Financial Holdings LLC was acquired by Santander Consumer USA in October 2009.] WFS Financial ran up the credit-risk scale. Everyone else basically ran from the segment, but Westlake hung in there. ... They were unwavering through all that.
Was demand for subprime still there, even though the supply of credit wasn't?
As the credit crisis hit, dealers who had been doing 300 cars a month all of a sudden were doing 180 cars a month. The subprime subset became the fastest growing subset.
I've heard lenders warn each other about a stampede in subprime that will lead to lower pricing. Dealers say, "What stampede?"
We have not aggressively changed pricing. We are a little more aggressive for franchised [dealers] because of how well they perform.
We charge high rates to consumers, but we will finance consumers, we will finance vehicles that others won't touch -- that other lenders aren't comfortable financing.
Where does the growth come from?
We now have about 285 sales staff. That's about 80 people -- closer to 100 salespeople -- which we added in 2011. We are north of 13,000 dealers. Not too long ago, it was about 9,000 dealers.
How many franchised, new-car dealers as opposed to independent, used-car dealers?
We are about 30 percent franchised and about 70 percent independent. There has been a very dramatic increase in franchised. A few years ago, it was about 15 percent franchised.
The franchised segment has been doing well. Car dealers are selling more used cars. Business overall basically has been flat, but used cars have grown.
Are you doing more "nonprime," or "near-prime"?
We consider ourselves to be a full-spectrum lender. We can handle from a zero FICO score to 850. Our rate and our fees are not going to be as competitive for those near-prime customers as Capital One or Wells Fargo. But we'll take vehicles those guys won't touch.
What's your average FICO score?
Our FICO average is 565. We are a true subprime lender. Other entities may say "near-prime" or "nonprime" and avoid the term, but we make no bones about it. Our goal is to provide a way to go for a lot of customers.
How much volume do you do?
We are on a pace for about 10,000 loans a month right now. That's for the fourth quarter and through the first quarter, I would say. In 2005 to 2006, it was around 3,000.
We're not an overnight sensation. We're growing through new markets, we're growing by adding to our dealer base, we're growing by adding to our sales force. But basically we're sticking to the same thing.
You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.View the original article here
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