Auto dealer network taps $307 billion used car financing market

Business Wire, March 7, 1996

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--March 7, 1996-- In a revolutionary move, a network of franchise new car dealers across the south has aligned to form a financing company for their used car sales, tapping a substantial profit center traditionally dominated by banks and finance companies.

"Financing of used cars is the profit center for auto dealers, and we've been letting it slip right through our fingers," said industry veteran Terry Taylor, founder of the group which will be known as First Financial Acceptance Inc. "By allowing third parties to handle our financing, we have been giving away one of the most profitable aspects of our business and losing personal contact with our customer in a crucial aspect of that business."

Taylor, an industry veteran whose nine dealerships sold over 20,000 cars last year, has been receiving numerous calls from franchise dealers for information on the First Financial Acceptance alliance.

Taylor believes that while individual dealers would find it difficult to underwrite and service their own financing venture, a network of dealers can fund, hire professional finance management and achieve rapid profitability under the First Financial Acceptance plan.

"The network will also allow for professionally trained collection personnel, modern communications networking, insurance controls and a host of other advantages impossible to integrate into any single dealership," said Taylor.

Taylor has experience with self-financing, pioneering the "buy here-pay here" concept for used car sales in the early 80's.

Taylor's vision in forming First Financial Acceptance comes not only from his experience, but from the size of the market. A recent Automotive News article quoted CNW Marketing Research that 29 million used cars and light trucks were sold in 1995, not including private transactions. At an average transaction price of $10,600, that indicates a $307.4 billion financing market.

Taylor pointed out that the profit on financing new and used cars often exceeds the profit of selling the auto.

Industry factors also figured significantly in the timing of the formation of First Financial Acceptance, according to Taylor.

"Used car megadealers like Auto Nation USA and Car Max are forming for the primary purpose of entering the financing business," said Taylor. "Existing dealers must realize that they don't need to expand their physical facilities to compete in this lucrative financing market. They can maximize the profit potential of their current facilities by introducing used car financing in a coordinated plan with other dealers.

"Just as important, they are sustaining long-term customer loyalty and contact that can be converted into future new and used car sales."

Many of First Financial Acceptance's participating dealers, who are located in Florida, Tennessee, North Carolina, and South Carolina, will not only offer the competitive financing packages but will also be part of ownership.

First Financial Acceptance will have initial capital in excess of $120 million available for their dealer network to warehouse/finance used car consumer purchases. "Obviously, the cost of capital to fund a financing operation at that level will be significantly less," Taylor pointed out.

Taylor intends to focus initially on southeastern states in building the network, although he has been receiving calls from dealers nationwide.

"We will be announcing the participating dealers shortly," said Taylor, who is currently finalizing arrangements for First Financial Acceptance to begin testing its lending products at his dealerships this month, and then initiating operations at participating dealerships shortly thereafter.

CONTACT: Communications Group

Larry Getlen, 407/392-2300