Prestige Financial Offers Dealers Help to Overcome Market Troubles
SALT LAKE CITY — In the face of current market challenges, Prestige Financial said it has taken several bold steps to help its partner dealerships increase sales and profitability in the growing niche of pre-discharge bankruptcy financing.
According to officials, a cornerstone of this initiative was the Open Bankruptcy Auto Finance Symposium held at Prestige's Salt Lake City headquarters earlier this February.
For two days, dealers were trained by bankruptcy attorneys, advertising experts, lender executives and dealership finance directors on virtually all topics essential to success in open bankruptcy business. The symposium, which Prestige believes to be the industry's first such event devoted exclusively to helping dealerships service pre-discharge buyers, was attended by several dozen special finance professionals representing all four U.S. time zones. Participation was free of charge.
Keynote speaker Richard Hayden told the audience that personal bankruptcy has lost much of its stigma, with a prevailing attitude among consumers being, "If Trump can file, why can't I?"
He supported his claim to bankruptcy's widespread acceptance by citing results of a quick Internet search: "If you Google ‘mom,' ‘apple pie' and ‘chapter 13 bankruptcy,' you'll see that chapter 13 bankruptcy may not be quite as popular as mom, yet, but it's more American than apple pie."
Hayden, a practicing bankruptcy creditor's attorney in Spokane, Wash., emphasized several points that can help dealers to best traverse the bankruptcy landscape that continues to evolve under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, as well as economic stimulus-related legislation.
In particular, he emphasized the importance of timely lien perfection and conservative loan structures with affordable monthly payments A former bankruptcy trustee, Hayden underscored the need for dealers to open lines of positive communication with their local Chapter 13 Trustees, the "gatekeepers" to Chapter 13 debtors, in that it is typically the trustee who must authorize the debtor's commitment to any new debt.
"Prestige's Open 13 product presents a win-win-win," Hayden stated. "The dealer sells a car to someone who is having a hard time getting credit for a loan while in bankruptcy, the customer can keep going to work, and the trustee continues to collect payments on the bankruptcy plan for all creditors."
Hayden also pointed out that Prestige's unique Rate Reduction Program, which lowers the customer's interest rate as payments are made on time, can appeal to trustees who might otherwise object to the risk-adjusted APRs associated with bankruptcy auto finance.
With Chapter 13s currently representing roughly one-third of all consumer filings, symposium attendees received an in-depth description of one of the country's most successful Open 13 dealer operations.
Greg Wilhelm, from Mike Calvert Toyota in Houston, walked dealers through the critical factors that have allowed his finance department to average more than three dozen open 13 contracts per month. In his A-to-Z presentation, Wilhelm even provided dealers with his customer interview scripts and document checklists.
"Success in Open 13s does not come without effort and requires the full commitment of your dealership, from the GM to the UCM to the BDC," Wilhelm conceded. "But once you get all the right pieces in place, it becomes an efficient machine that produces strong grosses and high CSI, month after month."
Prestige introduced its Open 7 product in the late 1990s and added both Open 13s and double BKs shortly thereafter.
When filings dropped off after BAPCPA's enactment in October 2005, Prestige continued to offer the open bankruptcy products but shifted the bulk of its originations to non-prime paper. Now, with the recent resurgence in filings, the American Bankruptcy Institute reported a 33 percent increase from 2007 to 2008 and suggests that 2009 will see an even greater rise, Prestige is poised to reassert its position at the forefront of the space.
According to officials, the Symposium gave dealers important insights into several other aspects of pre-discharge bankruptcy business.
Theron Morrison, a bankruptcy debtor's attorney from Ogden, Utah, stepped attendees through the filing process and explained the factors considered in deciding whether to keep or surrender an existing vehicle.
Additional highlights included discussions on advertising effectively to saturated bankruptcy lists, accessing and understanding the documents (or statements and schedules) the debtor files with the bankruptcy court, and structuring a special finance department to maximize volume, profit and customer satisfaction.
"We've been very successful in subprime for a long time, but given the abundance of non-bankruptcy subprime buyers in our market, we've never really targeted the open BKs," noted Sean Murphy, finance manager for Phoenix's Earnhardt Auto Centers, which was Prestige's top-volume partner in both 2007 and 2008.
"With bankruptcies skyrocketing as they are, it's definitely something that's caught our attention. That's why I'm here," he added.
Most of the dealers in attendance agreed that open bankruptcies can help to revitalize their sagging sales volumes.
For instance, Karen Vance, finance director at Hendrick Honda in Woodbridge, Va., explained that with so many subprime lenders pulling back, her dealership was struggling to secure workable approvals for a growing share of the credit-challenged prospects that its advertising was generating. Eventually, they cut off all but their prime leads and reassigned their special finance personnel.
Based on her participation in the symposium, Vance said she now sees pre-discharge bankruptcies as a way not only to restore that lost business, but also to add sales that weren't there before.
"I've already scheduled a meeting with my GM to plan our approach," she said. "We'll probably start with the 7s to get our basic systems in place then add the 13s. And once we feel like we've really perfected the process, we'll crank up the advertising."
Prestige's chief executive officer Robert Avery indicated he is pleased with dealers' enthusiastic response to the symposium.
"For so many years, Prestige was synonymous with open bankruptcy auto finance. We understand that other lenders have entered the space in our wake, and we welcome that competition because it creates further awareness and demand among dealerships," he said.
"But the dealers are telling me that nobody else out there is taking this kind of hands-on initiative in ensuring their success with the business, and that, at the end of the day, our product and our support remain an unrivaled pair," Avery continued. "For us, it's second nature. It's at the heart of what made our company thrive in the first place, and we're going to help a lot of dealers thrive at it, as well."