The subprime lending market is back and the only question left for dealers is, “What are you going to do about it?”

If you have had no interest in marketing to this segment in the past and have only a nominal interest now, the odds of future success are slim.

Subprime marketing cannot be done casually or occasionally. It needs to be done consistently and with a clear process. To understand the reasoning for this, let’s first define subprime.

The literal definition is as follows: “Referring to credit or loan arrangements for borrowers with a poor credit history, typically having unfavorable conditions such as high interest rates.”

At first glance, most would agree this is indeed the definition of subprime. However I would like to shed some light on why the definition should be modified.  A customer with a good credit history may be considered subprime for several reasons. The first is negative equity. Customers who are upside down with their trade may require the assistance of the special-finance department. 

So, too, may a customer who has a good credit history, but a high debt-to-income ratio.

Another customer who may require special-finance assistance is someone with a good credit history, but unable to show proof of all of income, and therefore has a high payment-to-income ratio.

I propose the definition of subprime as follows: “Referring to credit or loan arrangements for borrowers requiring the assistance of a specific lender due to their financial and/or credit situation, typically having terms less favorable to those not requiring specific lenders.”

A dealership subprime manager should not simply deal with subprime lenders, but instead build strong relationships with both conventional and non-conventional lenders that allow the store to get deals approved that otherwise may not have been approved. 

This manager also must be able to empathize with the subprime borrowers, regardless of their particular situation.  It is not a question of just moving a dealership manager to a special-lending position and only allowing that person to submit deals to subprime banks.

Chris Cochran is the manager of Captain Credit, a standalone subprime used-car store associated with Haddad Motor Group in Massachusetts. He can be reached at or 413-212-7342.