How TREND Financial innovates the finance space
TREND Financial is a bit different than other players in the Canadian auto finance industry.
It’s all leasing. It’s all pre-owned.
The average age of the car when the lease is originated is six or seven years; when they come back, they might be a decade or older.
And one of the mantras for TREND Financial when it got started was flexibility, says chief financial officer Brent Sawadsky. But being reasonable and measured at the same time.
“When the company was originally set up, the idea was to try to find areas that other lenders weren’t lending into,” Sawadsky said in a September interview with Auto Remarketing Canada in the lobby of a Toronto conference center.
“And it sort of precipitated (into) eight different tiers,” he said. “And those tiers allowed us to do different things and to be flexible, and to do smart lending that other people saw too much risk in, that we saw less risk, understanding the asset thoroughly and then understanding human beings.
“People make mistakes. People also earn money that doesn’t necessarily always get reported in the standard channels,” Sawadsky said.
These folks may actually be credit-worthy and just need some help, he added.
Both Sawadsky and chief operating officer Eric Kaplan — who spoke with Auto Remarketing Canada, as well —have backgrounds in auto finance.
“Their needs were not being met,” Kaplan said of consumer demand when the company first started. “There was a significant opportunity for us just to offer a program that consumers wanted.”
The recession likely deepened the pool of potential customers needing TREND’s help, but one hurdle the company and other have had is the negative connotation of subprime lending, Kaplan said.
“When the word ‘subprime’ is used attached to mortgages, everyone now applies subprime to everything else … you do alternative lending, therefore you’re a subprime automotive lender,” Kaplan said. “Breaking through that stigma, then, is the same issue we have now.
“And the reason why we’re still able to get quite a bit of funding is we’re able to convince the lenders and convince our lenders that the optics of the industry are not necessarily correct,” he said.
There is some media, Kaplan said, that correlates subprime mortgages to subprime auto financing, and that the latter would have the same as the former. But a deep dive, he said, would show that they’re different.
Explaining the specific differences and earning their confidence, Kaplan said, “that’s kind of the hurdle we have to get through.”
Another point that Sawadsky said TREND drives home to its lenders and investors is this: it is here for the long haul and emphasizes smart financing. Again, making choices based on reason.
“We’re not going to build market share at the expense of credit,” Sawadsky said.
Some of TREND’s approach to safeguarding that is based on its team’s experience in the auto finance field and understanding of “human psychology,” Sawadsky said.
“Although we can look at numbers and all this information, you have to layer on top of it (questions like) what does the person do, where do they live, how do they think? What’s going to be their priority?” he said.
The approach for the consumer has to be that vehicle has to be the priority, Sawadsky, as a functional means of transportation, rather than a social status, for example.
As far as other processes, Kaplan said one of the company’s approaches is to in-house as many tasks as possible, including chores ranging from remarketing to skip-tracing.
Kaplan said this actually helps in portfolio management; instead of working with outside parties that may have their own objectives, schedules and other customers, TREND has found value in working its processes in-house.
In other words, “control the entire flow,” Kaplan said.