Chief Executive Michelle Corson founded On the Road Companies in 2013 with money from friends and family to provide low-credit-score consumers with an affordable car loan.
Corson developed a love of cars at a young age, but her career wasn’t focused in the auto industry until she decided to pursue a career change “to use finance in a positive, creative way that could solve problems for people,” she told Auto Finance News.
“I came up with an idea of putting together a social purpose private equity fund,” Corson said. “I got some friends and family and said, ‘Hey, let’s all throw some money into a pot and see if we can make some car loans for people that might otherwise have to go to the ‘tote the note’ lot guy and get a bad car with a bad loan.’”
On the Road Companies is the parent of nonprofit auto lender On the Road Lending along with a dealership and repair business. The company originated its first auto loan on Jan. 16, 2014, Corson said.
On the Road Lending works with consumers to improve their financial education and pair borrowers with a vehicle that can help them grow financially, Corson said.
“After 10 years, we’ve seen the kinds of changes that have taken place in people’s lives,” she said. “I’ve seen people who’ve tripled their income, not because they got additional education or job training, but because they had a reliable car so that they could travel to a better job. The most transformative thing anybody can do is to have a decent car.”
AFN spoke with Corson about her career, approach to leadership and trends in the auto finance industry. What follows is an edited version of the conversation.
Auto Finance News: What is On the Road’s company goal?
Michelle Corson: We are trying to scale nationally and raise capital to put all the infrastructure in place. What we do is needed nationally, and we’ve been asked to scale across the U.S.
AFN: What do you think is the most underrated lending trend?
MC: Community development finance institutions, a CDFI. Our lending company is a CDFI, which is a designation of the U.S. Treasury. We are not regulated in the same way that a bank is, so we have a lot more ability to do things differently than banks.
As an example, we try to keep people in their cars, so we have a very borrower-first approach to loan servicing. We start with the mindset that people are going to need to succeed in their loan no matter what their credit score says. Most lenders don’t. They look at historical experience, and if they’ve had a 35% default rate with deep subprime borrowers, they say, ‘These guys are not going to make it, there’s a very good likelihood that they’re going to fail, so we price our loans accordingly to build in a huge loan loss reserve because so many people default on their loans.’
We don’t have to do that because our losses have historically been about 4%, by helping somebody get into the right car that is newer and under warranty. The average American can’t put their hands on $400 in the event of an emergency, so if the borrower has a $2,000 transmission repair bill, they can’t repair the car and make their car payment, and no matter what they do, they are going to end up losing that car. We want to get people into a car that is newer, under warranty, reliable and going to hold its value. We put a lot of emphasis on helping somebody choose the right car.
Our interest rates and pricing are about half of what the typical lender would be, because they have to build in that big loan loss reserve and we don’t, which makes a huge difference. I wish that more banks could do that, but it doesn’t work within the regulatory environment that they’re in. There is a way for them to do it by partnering and investing in groups like ours. We have a lot of banks that have made investments in our loan fund. We can make a riskier loan than they can make, and it enables more people to get reliable transportation.
AFN: What is your favorite piece of leadership advice ever received?
MC: Be bold and fearless. That’s an important thing for leading and especially as an entrepreneur, the adjacent part of that is embracing a willingness to experiment. Try things and they may or may not work, but they might surprise you. You’re going to learn from it no matter what. We have a culture of experimenting here and require that of our employees.
AFN: Who has had the biggest influence on your career?
MC: Henry Ford. I am blown away by the change in our society, in our economy, and in our culture that happened as a result of his quest to make car ownership possible for the common man. In the day he was around, cars were a luxury for the rich, and he felt like the men who worked in his factory needed to be able to buy the cars they were making; that was transformative.
The other person who inspired me is Bertha Benz, wife of Karl Benz. He was a tinkerer. Karl was an engineer, and he liked to spend all his time with his head down in his garage, figuring out how to make the perfect car. Bertha was a marketing genius as well as his financial partner. She said that if people are ever going to not be afraid of cars, they need to see it. She took the first road trip. She went from her home to her mother’s home in Germany, and along the way, she invented brake pads and figured out how to unclog a fuel line using a hat pin. She was brilliant.
AFN: What’s something your employees would be surprised to learn about you?
MC: I’m open about everything, but I would say that they don’t know I took auto tune-up in high school, probably given the fact that I’m not as competent in that area as virtually anybody that works for me. I’m also an artist; I paint.
Registration is now available for the annual Auto Finance Summit East 2024, May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Visit AutoFinance.Live to learn more.