GREELEY, Colo. — Many buy-here, pay-here dealerships
originate contracts with interest rates at 20 percent and higher. It's one of
the reasons why store managers in California cheered a year ago when the
governor vetoed a measure that would have capped APR at BHPH dealerships in the
Golden State at 17.25 percent.

However, in the middle of the Rockies at Herbies Auto Sales,
the store moves metal with contracts at 9.99 percent APR.

It's a rate that's been in place for more than three years.
And it's obviously working since during that span, the store was named the
Quality Dealer of the Year by the Colorado Independent Dealers Association.

Herbies Auto Sales general manager Cindy Christiansen
explained how she arrived at the idea of contract terms at 9.99 percent. She
was at a conference unrelated to the car world.

"I was sitting there doodling, and it came to me like a
flash of lightning. I'm not kidding. It was divine," Christiansen said. "I was
so excited that I called the dealership and I said, ‘We want to take care of
our customers.'"

Christiansen elaborated about how Herbies reworked its plan
to make 9.99 percent APR its sales strategy, one of the elements that's
triggered a customer referral rate above 80 percent.

"The point was the difference between the 9.99 percent and
the 16.7 percent rate, which is where we were on active rate, was about
$1,650," she said. "So we took that and put it on the front of the loan as a
warranty reserve. That money is in a giant pool now, and we have it 24 months.

"Not only did it benefit us because we have the giant
reserve, and our charge-off rates is only 1.28 percent, but it also benefits
our customers because they now have a warranty and a lower interest rate,"
Christiansen added.

Herbies isn't exactly on a mountain ridge all by itself. The
lot is situated in a market that already has about 100,000 people. The store
also pulls customers from Cheyenne, Wyo., about 60 miles away, as well as Fort
Collins, a Colorado college town of more than 300,000 people, and Denver, the
state's metropolitan center with 3 million inhabitants.

"We're the only ones who do it," Christiansen said about the
store's 9.99 percent contracts. "People might think I'm crazy, but we've been
doing this for three and a half years already. It just keeps getting better,
and the reserve keeps getting bigger.

"As you can imagine, after two years, we can start pulling
out from that reserve. We can start pulling that profit out, so it's really
great," she continued.

Meanwhile, Herbies doesn't ask for a laundry list of
customer requirements in order to make a deal at 9.99 percent APR. Normally,
Christiansen indicated that customers need to have at least three months at
their current residence and employment.

"We don't look at the bureau per se," Christiansen said. "We
don't like to sell to men who don't pay for their kids. If they don't pay for
their kids, they won't pay for their car. That's about the only thing. We
verify their job and their residence, and pretty much it's a go."

Herbies has been in business since 2000. Including
Christiansen, the store has a staff of 14 employees.

"Our plan has been really amazing," Christiansen said.
"We've chosen a set of core values that are non-negotiable. Our biggest thing
is to grow our people. We understand that the people are the key. We spend time
with them one-on-one. My philosophy is if I focus on my people and their
growth, the bottom line takes care of itself because they're learning and
growing personally.

"I always tell them that whether they're at Herbies or go
on, I hope they've elevated and learned something that we've added value to
their life. That's how we run things. And that's how we treat our customers, as
well," she went on to say.

Nick Zulovich can be reached at nzulovich@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.


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