Western Funding Inc. doubled its dealer base to 2,000 dealers, after it signed about 1,100 new dealer partners year to date, according to Guerin Senter, president of the Las Vegas-based nonprime auto lender.
“The dealer is my direct customer, especially in the nonprime track,” Senter said. “So a great relationship between the finance company and the dealer is really great for everyone.” When considering dealer partners, Western Funding looks at metrics to predict loan performance, Senter said while speaking at the Auto Finance Summit 2015.
The performance of indirect auto loans originated through a dealer who has been in business at least two to five years is more consistent than a dealer who has been in operation a year or less, he said. “We don’t even do that business anymore, we just can’t get the performance out of it.”
The lender also looks at early delinquencies and how the dealer has structured the loan for the consumer as well, according to Senter. He said the lender keeps an eye on metrics like, “mismatching the timing of their first payment,” or “not aligning the first payment with the borrower’s payment cycle.”
To help manage “ancillary problems” that can arise between and lender and dealer, Western Funding created a Triple Pay program, in which the dealer receives a check when a deal is funded, another check after 50 loans have been made and placed into a pool, and a third at the end of the term of the pool of deals, Senter explained.
“The dealer gets more money if the contracts perform,” he said. “So the dealer figures out pretty quickly, ‘Don’t send Western Funding the deals where you don’t think the borrower’s going to make it.’”
