Deep subprime lender Pelican Auto Finance LLC has picked AUL Corp. to provide service contracts to its borrowers, who typically lack funds to cover mechanical malfunctions in their vehicles.
“It all started with looking at the historical performance of a number of our customers, who, quite frankly, were all well-intentioned,” Pelican Chief Operating Officer and Chief Compliance Officer Joel Kennedy told Auto Finance News. ”But because of the way their personal finances [are], any other thing that could hit them — like if the transmission goes out on their car — are giant tidal waves to these consumers” that render them unable to make their car payments and prompt them to “make a conscious decision to walk away,” he said.
The service contracts, which will be administered by AUL and funded by Pelican, are a way for customers to hedge against major malfunctions, so they can stay in their cars and continue to make payments, Kennedy said. The contracts cover basic repairs — defined as things that would keep borrowers from being able to use their cars — and are structured to be affordable to borrowers. “If your radio doesn’t work, you can still drive the car,” he said. “But if the transmission drops out, then you’re stuck.”
Pelican, founded in 2009 by Kennedy and current Chief Executive Troy Cavallaro, has a $60 million portfolio, 100 employees, and works with dealers in more than 30 states.
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