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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Dealerships could miss the boat on this great source of revenue by failing to identify those banks that are more than willing to do business with these customers. Generally, banks are looking for three things: ability of their income, stability of residence and employment, and willingness to maintain their obligation. The industry benchmark for loans to this market segment is two years on the job and two years of residential history.
Understanding the Hispanic Consumer
A common characteristic of this market is that many consumers in this segment tend to pay cash. Don’t be afraid, however, as many regional and local financing companies will take bank statements or a letter from the employer stating the income. Additionally, the Hispanic customer with a W-7 also tends to make bigger down payments, and we all know what cash down payments do for a deal.
Best of all, there are several nationwide lending institutions that specialize in the “W-7” market. There are also many local and regional financing companies that are willing to offer loans to these customers. It is worthwhile for your special finance department to research these institutions, as many of them would rather have a large portion of their loan portfolio held by Hispanic customers.
Although some people think this market is too difficult or too time consuming to service, you shouldn’t be afraid to explore what it might be able to do for your dealership. The truth is this market isn’t anymore bothersome than the rest of the subprime market your dealership services. By ignoring this market, however, you will be missing the opportunity to add considerably to your dealership’s bottom line.
Send an email to Bob.Blackburn@autolendingnetwork.net to attain a listing of W-7- friendly lenders. Additionally, if you would like to supercharge your subprime, he can send you a copy of the “49.5 Ways to Supercharge your SubPrime.”
