More than 40 years after he opened his first used-car dealership in Detroit, Don Foss is still in the special finance game. Along the way, he became the largest independent dealer in Michigan and founded Credit Acceptance, which has been buying subprime contracts since 1972. Special Finance caught up with Foss to learn his secrets for lasting success in subprime auto retail.

SF: How did you get started in the car business?

DF: You could say I started small. I bought an old tow truck and went around town, buying and reselling junk cars. Eventually I was able to buy better cars and sell those — first out of my driveway, then from my first lot, in 1967.

SF: Was it your focus on the subprime market that allowed the business to grow, and what led you to start Credit Acceptance?

DF: Well, at that time, those were really the only customers I had. The business did grow and we were able to open a couple more lots. But I began to realize that, even as I worked as hard as I possibly could at selling cars, we would have to do better on the collections side.

We decided to start the finance company in 1972. The two people I put in charge were not all that experienced in finance, but they were experienced in collections. It worked out well for me — I could still be the friendly salesman on the lot and not have to turn around and play the mean collector the next week.

SF: At what point were you able to offer your lending services to other dealers?

DF: It was nine years before we took on another dealer — and before Credit Acceptance turned a profit, by the way — but that wasn’t necessarily the plan. I thought I would just be a big retailer. But a friend of mine wanted to open a lot and he knew it was the financing that made it work for me. It spread by word-of-mouth from there.

SF: Did bringing on other dealers require special finance training as well?

DF: Absolutely. We had to train our new dealers on process, inventory … You have to understand that most dealers are trained to sell the customer on the car and its features. The problem is, that might not be the car that the customer can afford. In special finance, you’re selling the benefits of financing.

SF: Do you believe that’s the reason many dealers are wary

of the subprime market?

DF: A lot of dealers will always ignore those customers. Now, that creates a bigger market for me, but what I hate to see is dealers who don’t show any respect for those customers. Sales guys may feel that, if they can’t finance the customer, they’re wasting their time. But you really just have to match the customer to the right vehicle.

I’ve often said that if you’re telling the customer, “You don’t have enough of a down payment, you have to go get more money,” you’re making a mistake. Even if they do manage to get more, eight or nine months later, making the payments has become a big problem.

SF: Having been in the business since the ’60s, you’ve been through several downturns. What advice can you offer to other dealers to help them stay in business now?

DF: One secret to our survival is that we’ve always had very little debt. We’ve managed our overhead well. It’s so easy for a buy-here, pay-here dealer to sell himself into oblivion. With Credit Acceptance, we were at least always able to finance the lots.

The early ’80s was as bad as I’ve ever seen it. We had a banner up at that time that said, “We buy cars, bring your title!” Every day we would have a customer with his title wanting to sell his car because he was moving to Texas. The joke was, “Will the last person out of Michigan please turn out the lights?”

But as rough as it got, we were able to survive and thrive. When things were at their worst and my friends would ask me, “Don, what do you think is going to happen?” I would just say, “Hey, people still need cars. When I see them walking down 12 Mile Road, rather than driving, I’ll start to worry.”