MARBLEHEAD, Mass. — When explaining the central message of what FinCo Management can offer, company founder and president Toby Reiley challenges dealers with the following question: "How many subprime customers have you lost because you can't get them bought?"

In other words, the premise of the company Reiley started to build three years ago is to help dealers finance subprime customers who have cash upfront, but are otherwise considered "unbankable" by most lenders.

These types of customers have the cash down to cover all dealers' costs, but are unable to find lenders to finance them because of bad or no credit history, residence and employment requirements, or they have no social security number.

"The dealers were turning away buyers with cash. That's the bottom line," Reiley stated, emphasizing the key function of FinCo. "How many customers with cash did you lose because you couldn't get them bought?"

Basically, FinCo is a complete consumer finance services contractor that operates under the Buy-Here, Pay-There concept, not to be confused with Buy-Here, Pay-Here.

As part of the BHPT concept, the company allows dealers to build their own loans for subprime customers to their liking and then FinCo takes care of the logistics.

This includes underwriting, booking, preparation of monthly statements, payment security and collections, telephone customer service, title management and repossession/remarketing, if needed.

"You can structure it as if it's your own deal. You structure it and put it together and submit it electronically," Reiley stated.

"The major logistic we take care of — and no one thinks of this upfront — is compliance," he pointed out. "It just goes on and on with all the things you have to do to be a Buy-Here, Pay-There dealer."

Sharing a bit of the company's history, Reiley said that FinCo Management began as a pilot program for a dealer customer in 2006, who wound up not wanting to run it beyond the end of the year.

But when the credit crunch accelerated at the beginning of 2007, "dealers needed this product more than ever," Reiley emphasized.

So, FinCo was started up again in August 2008 and was officially introduced at the National Automobile Dealers Association Convention in January.

The company is currently in the process of gaining qualification and licenses to operate in states throughout the country. As of March 1, Reiley said, FinCo was qualified or licensed in 26 states.

He expects that number to go up 10 states by the end of April.

FinCo is waiting to get licensed in Massachusetts, its base state, and anticipates that it will receive it at any moment.

Though FinCo is actively marketing itself across the country, it will first roll out the program in its home state and then spread to other states.

"It's always good to start in the state you're domiciled in," Reiley pointed out.

Moving on, Reiley indicated that there are no upfront costs, no monthly subscription fees, and no minimum volume requirements for dealers to use the program.

Basically, on the first four loans of the month, dealers receive the principal portion of each payment made and FinCo receives the interest. An $85 origination fee is deducted from the first principal payment.

"The fifth deal on up, we allow dealers to participate in the interest," Reiley noted.

Typically, FinCo's target audience is dealers who make between zero and six subprime financing deals per month. If a dealer is financing 15-20 deals per month, Reiley often recommends that the store conduct its own BHPH operations.

With regard to the interest rate on the loans, it reflects the state's usery limits, but FinCo always caps it at 24 percent.

As far as the amount financed, Reiley noted: "We don't have an upper limit, but we do have lower limits depending on the term and finance rate. Where the state does not impose a limit, (the minimum) is $750."

In California, for example, the lower limit for BHPT is $2,500.

However, FinCo is also flexible when it comes to adjusting the term length or amount.

For example, say a dealer has a customer that wants to finance $3,500 for a vehicle purchase. At FinCo's rate of 24 percent over a term of 18 months, the dealers wouldn't have to pay any fees.

If the dealer needed to shorten the loan length to 12 months, he would simply pay FinCo a fee of $15 per month.

Moving on, FinCo also educates consumers about the BHPT concept by showing them videos at the dealership when they go to make a purchase, sort of a "Credit 101," Reiley noted

"When you get to the table and hand them 20 documents, they're not scared," he added. "Most of these people have never been in mature credit relationships."

That said, Reiley also emphasized that BHPT is not for every deep subprime customer, but is intended for shoppers that have enough cash to support a loan structure that makes business sense, even if no payments are ever made.

"If it's a smart deal for dealers, we allow them to make it a done deal," he concluded.

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