ALLIED Credit, the business funding retail finance for many of Australia’s biggest names in motorcycling, marine and powersports for the past decade, has revealed a unique dealer-centric business model as it sets off on a plan to become a significant player in the larger car finance market.

Its key unique selling proposition is that Allied Credit can form joint ventures with larger dealer groups enabling dealers to invest in the fortunes of their own finance company.

This is especially appealing to larger dealer groups although all dealers can benefit from the dealer-centric nature of the business whether they are invested in the loan book or not.

The JV completely changes the relationship between dealers and their retail finance house because both sides of the relationship have a common interest. (See ‘Allied Credit invites ownership’ story)

The second USP is that Allied Credit is setting up an experienced loan relationship team that will work with dealers to workshop loans to help buyers get suitable finance.

Allied Credit is seizing on the rigid interpretation by the big financiers and banks to the responsible lending provisions laid across cars loans by the regulators which have effectively imposed a credit squeeze on new and used car loans from car dealerships.

As banks tighten and limit the qualifications buyers require for approval, dealers are struggling to get loans for their buyers and this is hurting sales results. The collateral damage from this loss of sales is ricocheting though the entire dealership operations and jobs are being lost.

With the banks working to a strict risk formula – if you don’t fit into the formula you don’t get the loan – Allied Credit is one of a number of financiers trying to step into the gap that is being created in the car finance market.

The newly appointed CEO of Allied Credit and former chief of Macquarie Lending, Jon Moodie, told GoAutoNews Premium: “It is fair to say that the banks are heading down a pathway of simplification and standardisation. Things need to fit more within a risk box for the banks to feel comfortable.

“So there is an opportunity for non-bank finance companies to operate in the market and provide value to generate new customers (for dealerships). That is clear. That is probably why you are seeing more financiers in the market,” Mr Moodie said.

The company believes that a ‘Yes or No’ loan environment is not the only solution to vehicle finance and that there are many shades of grey that can be accepted within the responsible lending guidelines.

“It is a case of setting your credit appetite with your pricing and then your processes internally,” Mr Moodie said. “A mixture of those things will create the business model that works.

“It is fair to say that in our case we would probably have a broader appetite than a regulated bank. The big banks are pushing for high quality business only. It is an efficiency thing for the big banks.

“It is about standardisation and simplification that lends itself to fewer vanilla deals whereas we see ourselves as a broader lender and a good partner for dealerships to have.

“That does not mean that we will do credit impaired business but we consider ourselves to be good partners. If a deal is difficult you can workshop with us and talk to us and see if we can find some ways that the customer is suitably looked after. We have a model that is geared to do that.

“We have the staff to do that and we are increasing our staff numbers as well. We are opening a Melbourne office to build a credit settlements team and we are always looking for experienced people who can communicate with the dealers and the business managers to talk through deals.

“Some of our larger competitors and big banks are systems-based so if the computer says ‘No’ it is sometimes hard for dealers to get hold of someone at the bank. So we are trying to position ourselves as different from that.”

Russell Bryant, the chief operating officer of Allied Credit and also a former senior manager at Macquarie Leasing, said that Allied Credit would be a back-up for a dealer’s captive financier where “the deal may not be quite right, the pricing is not quite there or the conditions on the deal are not acceptable”.

“It is not just black and white. These days there are deals in between and there are used cars as well. That is another opportunity,” he said.

Mr Moodie said that the company had been surprised “at how many new cars we have been financing and that says to us that dealers sense that a deal is not going to be automatically approved through the captive or a bank”.

“They don’t want to risk it going into a black hole where it is referred or declined and they cannot talk to anybody. So then they will put it through to us instead because they know that if there are some complexities with the deal then they can talk to someone,” he said.

“It does not mean it is a bad deal, it just means that it does not fit into a particular box. And that is the beauty of our model. It just means that we have not created some box in which everything has to fit.

“We think there is still a place for a relationship-based financier that is pragmatic in their approach that is, of course, compliant and follows the regulations but provides good systems and good people who you can talk to. At the end of the day it is still a people business,” Mr Moodie said.

Allied Credit is operating nationally with more than 100 car dealers coming on board since Allied moved into car retail finance more than a year ago.

Mr Bryant said: “Dealer numbers are growing every day because people want an alternative that is not a big bank or an OEM captive. We are getting many, many referrals where dealers who are working with us are recommending us to other dealers. That is happening every day.

“There are very few alternatives to us apart from brokers which suit some dealers but not everybody.”

By John Mellor