Competition within the buy-here, pay-here dealership space became even more intense on Thursday as Tricolor now has more financial horsepower to meet the transportation needs of Hispanics.
According to a news release, the company announced it received a $30 million preferred equity investment from a global institutional investor to scale what Tricolor described as its mission-driven, technology-powered approach to the sale and financing of used vehicles.
In 2018, financially underserved customers in America spent $48 billion in fees and interest on subprime auto financing and contracts at buy-here, pay-here stores, according to a recent report from the Financial Health Network. Tricolor insisted that it is actively transforming the vehicle-buying experience and helping to eliminate unnecessary fees through a business model that aligns customer impact with business outcomes and leverages advanced technologies like artificial intelligence (AI) and machine learning.
To date, Tricolor said it has originated nearly $1 billion in auto financing throughout California and Texas. With this infusion of funds, the company explained that it will rapidly scale its platform and retail network to expand availability of auto-financing options for Hispanic customers in new markets.
“The deck is stacked against financially underserved customers in America when it comes to purchasing and financing a used vehicle,” Tricolor chief executive officer Daniel Chu said in a news release.
“We have proven that the right infrastructure and culture make it possible to build a profitable business providing these customers with affordable access to high-quality vehicles,” Chu continued. “This investment will allow us to deliberately expand our business in pursuit of a mission to impact and improve even more lives.”
Tricolor insisted that its proven and proprietary credit decisioning engine demonstrates its advanced analytical competency and serves as the foundation for a new direct financing model for subprime customers. Its AI-powered segmentation model can assess unique, nontraditional attributes for no credit and low-income consumers in order to assess intent and ability to repay.
For more than a decade, Tricolor insisted that it has successfully scored no file and thin-file Hispanic customers, as evidenced by five well-received ABS securitizations.
This investment caps a number of recent key milestones that demonstrate both Tricolor’s impact and its ability to rapidly scale in service to consumers.
In November of last year, it became the only institution among all auto asset-backed securities issuers to earn a Community Development Financial Institution (CDFI) certification from the U.S. Treasury Department.
Earlier in the year, Tricolor launched a new affiliate called Tricolor Insurance that leverages its proprietary underwriting algorithms and successful scoring strategies to provide affordable, low-monthly premium insurance policies to vehicle owners. The company said it will continue to expand this program alongside its growing dealer and financing network.