A fast-growing subprime market has AmeriCredit raising its goals for vehicle-loan volume and widening its portfolio of franchised dealers to 13,500 in the U.S.
“The subprime market is surging as consumers take on more debt and fall into the nonprime bucket,” says AmeriCredit President and CEO Daniel E. Berce.
The firm generated $1.73 billion in new loans in the second quarter, up from $1.61 billion in the first quarter and $1.45 billion in second-quarter 2005.
Loan volume was at the highest level since 2002, says Berce. In 2003, AmeriCredit ran into a period of inflated low-risk loans and losses, causing it to freeze quarterly loan originations at $750 million.
Berce, who was previously the company's CFO, led a turnaround for the nonprime lender. With the subprime market growing at two to three times the rate of auto finance in general, he says AmeriCredit is looking at new loan originations of $7.2 billion to $7.8 billion for the full year.
Berce says AmeriCredit remains committed to underwriting loans for consumers with 550-650 credit scores, whereas most banks prefer applicants with scores over 600.
However, AmeriCredit this year acquired Bay View Acceptance Corp, a specialist in prime loans offered at extended terms of up to seven or eight years. Bay View's preferred credit-score range is 730- 740, bringing AmeriCredit “a very attractive niche market,” says Berce.
AmeriCredit has begun direct lending to consumers, but still considers itself an indirect lender working through auto dealers.