FORT LAUDERDALE, Fla. -

AFS Acceptance chief executive officer Dov Szapiro explained why his company’s decision to sell 65 percent of its equity to Mexican finance institution Credito Real “could not have occurred at a better time.”

With growth expectations stemming from originations as well as possibly buying portfolios from related finance companies buy-here, pay-here dealers might have, Szapiro shared his enthusiasm about the developments with Credito Real exclusively with SubPrime Auto Finance News late on Thursday.

“This is a major development for AFS and all its stakeholders,” Szapiro said about the deal made public on Wednesday afternoon. “It’s a great leap forward for AFS to become part of a best-in-class company with deep credit and consumer finance roots, broad experience providing credit to the underbanked and the no-credit segment and with a strong balance sheet.”

Szapiro then described the landscape AFS Acceptance navigates nowadays; one that’s supported by the data compiled from Equifax.

Analysts indicated 3.17 million vehicle installment contracts have been originated through June to consumers with an Equifax Risk Score below 620, which are generally considered subprime accounts. The amount marks a 9.8-percent increase over the same span a year earlier.

Equifax added this newly issued subprime paper has a corresponding total balance of $56.4 billion, a 12.5 percent increase year-over-year. Through June, Equifax added 22.5 percent of auto loans were issued to consumers with a subprime credit score.

With those industry-wide figures in mind, here’s more of the reasoning why AFS Acceptance decided to part with 65 percent of its equity for $18 million.

“Our industry is currently being flooded by aggressive lenders who we believe may be taking too much risk,” Szapiro said. “We see non-industry players such as hedge funds and private equity firms who might have not experienced the cycles that AFS has that are simply reaching for yield.  This phenomenon is likely fueled by the vast liquidity in our financial system. 

“With the backing of Credito Real’s financial might and AFS’s industry specific experience, this transaction positions AFS perfectly to take advantage of the opportunities that the current excess will create such as portfolio purchases and acquisitions,” he continued. “We have the experience, the appetite and now, the financial backing.”

Credito Real indicated that AFS Acceptance’s outstanding portfolio stood at about $74 million at the time of the transaction. Szapiro described it as a “great and rewarding journey” as to how the company forged its way to that portfolio level.

Szapiro recalled that AFS Acceptance took root back in 2001 when he and his brother joined forces with a cousin and his business partner. In the earliest days, a five-person team serviced five dealer partners in south Florida.

“While the road hasn’t always been a smooth ride, we have learned from our mistakes and by investing in our people and continuously improving our dealer-centric business model and platform,” Szapiro said. “We have been able to survive difficult periods like 2008 and emerge stronger. 

“We have also partnered with the best vendors in our space to build a robust, efficient and scalable platform,” he continued. “This is a unique industry where we have found many competitors and peers to be very open to sharing ideas and lessons to make this a better industry for all.

“We have formed great friendships with fellow competitors and can even think of at least three peers that have been great mentors. I’m proud to call them friends,” Szapiro went on to say.

“Last but certainly not least, we have built a great team and strong relationships with key stakeholders like our 12-plus year relationship with our senior lenders,” he added. “Without them and the loyal support of our shareholders, we would have not been able to get to this point.”

This point also includes a dealer network of about 300 dealerships in 40 states; levels Szapiro is hopeful grow steadily now with Credito Real a part of the equation.

“This is great news for our existing dealer partners and those dealers that are not yet our partners,” Szapiro said. “This new partnership with Credito Real enables us to continue to expand our dealer-centric business and to provide them with solutions for their various financial and cash flows needs.

“We will also be looking to purchase portfolios from dealers and their related finance companies as well as independent finance companies looking for liquidity,” he continued.

Originations, liquidity and yield aside, Szapiro made one other point about why AFS Acceptance’s deal with Credito Real is important for all involved.

“It is also important to highlight the culture match between the two companies,” he said. “AFS was a finalist as best place to work for in South Florida and Credit Real has been named a Best Place to Work for in Mexico for three years in a row.”