Three years after its adoption, dealer compensation at BMO Harris Bank has changed from a single, 3% flat rate, Auto Finance News has learned. The new program, which went into effect June 1, is a three-tiered model with 1%, 3%, and 5% rates that increase in sync with loan terms, Craig Harter, the company’s head of indirect auto finance, told AFN.
The Chicago-based bank was one of the first of few auto finance companies to shift to a flat-rate dealer compensation model back in April 2014.
“We want to make sure we are competitive in the way we compensate our dealers, but we also want to make sure we’re giving our customers the proper transparency as they do business with their dealers,” Harter said. “We feel [our previous flat-rate program] has been very successful, and we enjoy good marketshare, but we want to offer better customer enhancement to allow a little more variety.”
Last year, BMO Harris originated $1.8 billion in auto loans, down from $3.4 billion in 2014 when the company first made the rate change, according to Big Wheels Auto Finance 2017.
Though the new program has been live for just a month, application volume has already increased 25%, Harter said. Additionally, the company plans to expand its lending to nearprime consumers and hire 12 to 15 more employees to handle the increased volume.
“Traditionally, we have a reputation as a prime and super-prime lender, but we’re looking to expand off of where that reputation has been,” he said. “We feel that as other players have retracted from the market, we have a great opportunity … to take advantage of the current market.”Like This Post