Subprime Lending Gets Friendlier

Chris Cochran had credit issues as a young man. So he’s sensitive when dealing with car shoppers lugging around subprime baggage.

“Having come up through college with credit problems myself, I can relate to others in that situation,” says Cochran, the finance director of the Haddad Motor Group in Massachusetts.
He spearheaded the establishment of a Haddad subsidiary, Captain Credit, a car store catering to the subprime set. In October, the operation relocated to a bigger facility, a former GMC dealership in Pittsfield, MA.

“We decided to move there when Captain Credit did so well,” Cochran says. “It has created a new area for us.”
Special auto financing is different. In regular car deals, the customer typically picks out a vehicle, then gets the financing.

It is the other way around for subprime customers. They arrange the financing first, then select a car from among those that qualify under financial restrictions. That finance-first approach eliminates a kid-in-the-candy-shop mentality that can gum up a deal when lenders say, in effect, “Too much car for that credit risk.”
Lenders also limit finance and insurance offerings a subprime customer can get on the installment plan. “You can sell some F&I products,” Cochran says. “You just have to be careful.”

A vehicle-service contract might get financed, bumper-to bumper aftermarket bling-bling likely won’t.
Cochran’s attitude reflects a new level of compassion the auto-finance industry is showing to subprime customers, once considered second-class citizens.

Pure deadbeats, who borrow with no intentions of paying back, remain a low caste of untouchables. But a lot of bad things happened to good people during the recent hard times. Reversals of fortune hit many Americans hard, knocking down credit scores.

Cochran is not alone in showing empathy for people struggling financially. Even those who have lost their cars in repossessions are getting a higher level of respect than before.

“We’re taking a dramatic new look at customer treatment of people who have had their vehicles repossessed,” says Randy Beil, Chase Auto Finance’s vice president-vehicle remarketing.

“We treat them with respect and humility,” he says at a National Remarketing Conference. “We realize some people are in tough situations.

“In the old days, if someone had his car repossessed, we’d tell him to talk to the repo company. Now, we try to talk to him, to answer questions.”

The kinder, gentler lender is a new concept, but old public perceptions linger. “I work for a big bank and I’m in used-car sales,” Beil quips. “That really drives people away on an airplane.”