SKOKIE, Ill. — The auto lending market has been dominated by
indirect lenders with very few companies that have both direct and indirect
lending operations. The current state of the auto finance industry is marked by
aggressive competition looking for larger market share without clear distinction
between prime and subprime and many lenders trying to capture first-time buyers
or buyers with credit issues.

At Turner Acceptance Corp., we decided to grow our direct
auto origination based on the experience we had with our personal and secured
loans. Growing a successful direct lending operation comes from the
relationship a lender has with both its customers and dealers and the ability
to retain those relationships beyond the current deal.

Finance companies that are trying to create direct lending
models that simply replicate an indirect program delivered to consumers must
understand that direct and indirect financing are two different products that
complement each other. They require different operations. One is more
dealer/deal centered (indirect) and the other is customer centered (direct)
with an underwriting that goes beyond the loan-to-value, the credit score, or
the model or year of a vehicle.

Being in the direct lending business for more than 12 years
has allowed me to see the benefits of having brick and mortar as a starting
point. However, new technologies eventually will play a more important role in
the way we interact with our customers.

At the current rate of usage expansion, mobile devices will
be more important when it comes to big purchases made at the point of sale, and
a digital presence represents a 24/7 branch that facilitates the access to your
product.

New technologies are already facilitating the access to
information and will also facilitate the access to financing and loans. There
are challenges ahead as regulators begin to understand that easy access to
credit is a consumer's need and not a lender imposed obligation, and that
consumers will demand less paper based interactions and more digital
transactions.

The industry is not far from the point where customers will
go to the dealership, scan the VIN with their mobile devices directly into the
lenders website, get the approval via email or text, and digitally sign the
financing contract, to finally have their lender to make an ACH transfer
directly to the dealer.

All of this will occur without additional stipulations or
paperwork, and possible without sitting at an office at all. This scenario will
be possible because of the relationship that the customer has with the lender.

At the end, lenders that do what is right for the consumer
will not only have better portfolios, but a customer base that will produce
good-quality repeat transactions and will generate quality leads by
recommending to family and friends. 

In regards to lending, quantity is important but quality is
the most important and direct lending can produce solid and consistent results
over time.

Editor's Note: Andres Huertas is the director of direct and merchant
lending at Turner Acceptance Corp., a consumer finance company founded in 1973
that specializes in both indirect and direct loan financing. The company's indirect
financing business works with franchised and independent dealers as well as retail
Merchants. Turner Acceptance's direct finance business provides personal loans
direct to customers throughout the Chicagoland area. 

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