CARMEL, Ind. -

A newcomer who manages an independent dealership might not recognize what the automotive landscape was like — especially for inventory floor planning — back in 1987 when Automotive Finance Corporation (AFC) started its operations.

If a store was a franchised dealership, the opportunity for floor plan financing was much more plentiful at that time because of relationships with automakers. If the rooftop was an independent, financing choices were limited.

AFC president and chief executive officer Don Gottwald elaborated about what the industry was like 25 years ago.

“The independent dealer simply did not have ready-access to many types of financing, especially inventory or floor plan financing,” Gottwald explained. “I don’t want to imply that floor planning didn’t exist.  It certainly did, but it was much more prevalent on the new car side of the business than it was on the used car side. There was very little inventory financing available to Main Street America used car dealers.”

Since 1987, Gottwald explained that a myriad of factors changed the used-vehicle market for these independent dealers. Program cars and off-lease units are just two examples of how the volume of used vehicles grew during that span. The churn of new-vehicle sales created more used units, as well. The expansion of consumer credit pushed the demand for used vehicles, too.

In 25 years, these industry factors combined to create a niche for AFC, a service the company proudly handles for dealerships that have floor plans consisting of just several vehicles to other dealers that have credit lines of several million dollars.

“We like to define our business as solving problems for our customers. That’s our value add, that’s our value proposition,” Gottwald explained to Auto Remarketing while discussing AFC’s silver anniversary.

“Our marketing tagline is ‘Our service will floor you.’ It’s really a service-driven business model. The relationship we have is very personal, very tactical, very brass tacks and focused on helping the dealers grow and improve their business and operations,” he went on to say.

Key Components to AFC’s 25 Successful Years

Gottwald didn’t hesitate to pinpoint a primary reason why AFC has been successful for 25 years.

“We have an extensive branch network that supports our business model and the customers’ business model, and we have a well-seasoned and expert staff that understands independent used car dealers,” Gottwald emphasized.

“We can’t speak enough about our people. Talented experts who come to work every day with the mindset of helping customers solve problems,” he added. “Our people really understand the needs of that independent used car dealer, their issues with sourcing inventory, and the retailing of that inventory. We look at ourselves as an enabler of the wheels of commerce in the used-car space. Our dealers tell us that our business model and our people help them to be better operators and stronger dealers.”

From its modest beginnings, AFC now employs nearly 475 professionals at 100 locations throughout the U.S. and Canada. They work feverishly to service more than 10,000 contracted dealers who secure vehicles at almost 1,000 auction locations.

Dealer floor planning is the core of AFC’s business. Gottwald emphasized each member of the AFC team is committed to listening to customers’ needs and  developing new inventory finance solutions, including programs that are specific to rental and salvage operators, as well as RV and powersports dealers.  AFC also provides short-term inventory finance solutions for wholesalers.

“We work really hard at building relationships. That’s one of the strategic differentiators of AFC, deep customer relationships we’ve built over 25 years,” Gottwald declared.

“A dealer who wants to do business with us can do so very quickly.” he continued. “Certainly loyalty is built over time by delivering what you say you’re going to do and backing it up with a strong service proposition.

While AFC might have been one of few floor planning providers available to independent dealers back in 1987, the company acknowledges its competition nowadays is steep, a challenge Gottwald accepts.

“We don’t take for granted any relationship just because we’ve had it for a long time. I also don’t believe and I don’t think anyone else here believes that just because we’ve had a relationship for a long time we can rest on that. We earn our customers’ trust, as well as their business, each and every day” Gottwald told Auto Remarketing.

“Customers have more options today than they’ve ever had. Information travels very quickly,” he conceded. “If we don’t meet our dealer customers’ expectations day in and day out, they have options and can go someplace else. We take a lot of pride in the fact that we’ve developed long-standing relationships with our customers.”

Beyond the human capital AFC employs, the company also has developed a sophisticated, proprietary IT system that enables the operation to underwrite credit risk and service customers well. 

In fact, Gottwald indicated AFC invested more into its technology systems last year than the past several years combined.

“We have a home-grown system that we’ve invested in over time. The reason why we’ve chosen to stay homegrown is we’ve recently done an evaluation of our system and it showed how it’s completely tailored to our business and our customers’ business model,” Gottwald highlighted.

The AFC boss went on to mention part of the recent technology investment enhanced the company’s Web and mobility tools so field representatives could be nimble in responding to dealer service requests.

“It’s not just an efficiency play,” Gottwald stressed. “Many will streamline business tasks or enhance technology as a way to take out costs. Quite the contrary for us, it’s an effectiveness play. How can we deliver better service? IT and technology are tools. They have to solve a real business problem or we don’t have much use for them.”

AFC as a Part of KAR

As dealers readily know, AFC is an affiliate of KAR Auction Services, along with ADESA, Insurance Auto Auctions and OPENLANE, the online auction company that was acquired last year.

During his quarterly update to the investment community, KAR chief executive officer Jim Hallett regularly applauds AFC performance, indicating how important the company is to KAR’s overall offering.

“You might have heard Jim Hallett say that KAR provides end-to-end solutions,” Gottwald pointed out.

“Certainly the liquidity for dealers to buy inventory at auction is an important part of that equation. We do fit nicely and strategically complement the physical auction businesses of ADESA, the virtual auction space from OPENLANE and even the hybrid/salvage model of Insurance Auto Auctions,” Gottwald added.

“Our business success has translated into very strong relationships with the financial community, which has enabled AFC to have access to the capital to grow our business and help dealers grow their business. Quite frankly, that’s not something everyone can say,” Gottwald stated.

Hopes for 25 More Years

While the industry has changed tremendously since AFC began, the company is prepared to tackle what might be ahead. Gottwald reiterated to Auto Remarketing how AFC must balance its concentration on the principles that made it successful while adapting to the industry changes that might develop.

“We are not going to dictate how a customer should do business with us. We’re instead going to continually ask our customer how he or she wants to do business – in our branch, online or via a smartphone app. That’s how we’ll do it,” Gottwald explained.

“We need to stay focused like we have, taking a customer-first mindset. We want to be the premier provider of service to our dealers,” he continued. “That means having a disciplined foundation on which to grow, that means not chasing the latest fads from a credit or business standpoint. Rather, we need to stay focused on the operating principles that have helped us get to this point. “

“It’s important for us to do that not just for our sake. I know it sounds cliché, but I believe it’s important to do that for our customers’ sake, too,” Gottwald went on to say. “We want to be here tomorrow to serve their needs. We want to be here 25 years from now to serve their needs. We’re an important player in the industry and we have a responsibility not only to our owners and employees, but also our customers to operate our business prudently, so we can be here for them.

“Consistency is huge for dealers. They want a finance company that’s there for them through the good times and the bad times. In order to be there consistently, we need to be disciplined in our operating practices,” he added.

And beyond being disciplined and consistent, Gottwald touched on one other point he believes is vital to AFC’s future.

“We really consider ourselves and our organization the type that likes to learn. We like to innovate. We don’t define that necessarily as inventing something new, but rather taking ideas from other industries and other parts of the world that can help our customers,” Gottwald noted.

“The world is changing at a very rapid pace. We need to be able to change as well,” he continued.

“We’re very proud of the business we’ve built here over the last 25 years. We do it with good old fashioned adherence to basic business principles focused on serving the customer. We’re always looking to better understand and solve our dealers’ needs,” Gottwald concluded.