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Financing the Hispanic Market

March 2007, F&I and Showroom - Feature

by Luis Gil and Bob Blackburn

In today’s special finance market, the Hispanic market is one of considerable size and importance to the automotive industry. Those who have dealt with this market know there are two distinct segments that need to be addressed separately. There are those with documentation and those without. Those in the country with permanent documentation (i.e. VISA, citizenship) do not face the same hurdles as those who migrated to the United States and obtained a tax identification number (TIN) — also known by its IRS Form number, the W-7. The IRS issues TIN numbers to individuals who cannot obtain a Social Security number from the federal government because of visa issues.

PriceWaterhouse, in its White Paper dated August 2005, estimated the Hispanic buying power at $686 billion in 2004, and predicted it to grow at a compounded annual rate of 8.2 percent. The Hispanic population is also the fastest-growing population and has the fastest income growth of any segment in the United States. According to Census Bureau data from 2005, the Hispanic population has grown 3.6 percent annually the previously 10 years, outpacing the growth of the general population by more than three to one. The current population of this consumer group stands at approximately 42.8 million, making this market too large to overlook.

True to Their Word

Many U.S. banks and financial institutions have become wise to the benefits of this market. The Hispanic customer offers a substantial source of revenue for lending institutions, as this group generally makes its payments on time. In many cases, this group will also pay off its accounts early — a fact born out of the high interest rates most Latin American countries impose on their consumer base. This has led to a cultural fear of interest rates. In many cases, Hispanic customers will bring their vehicle back to the dealership if they cannot continue making payments on their auto loans. Lenders like this because it eliminates the need for costly repossession specialists.

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