A “boutique” dealer network is being established by a 30-year pioneer in the nonprime auto financing industry - Credit Acceptance Corp, based in Southfield, Mich.

Departing radically from policies of franchising as many dealers in a market as possible, a new younger management team is “cherry-picking” dealer-partners in the nation’s 210 markets with a goal of setting up the “best” operators in exclusive territories, according to company officials.

Credit Acceptance’s president, Cincinnati Chevrolet dealer Keith P. McCluskey, is uniquely occupying a dual executive role in the retail sector. He and the company’s founder, Chairman Donald A. Foss, 57, are selecting the 2,100 members of the revamped CAC dealer network on a carefully deliberate timetable.

The network is being established in conjunction with launch of a “Guaranteed Credit Approval” (GCA) process that McCluskey champions as “second to none as a dealer profits builder.” Called CAPS by Credit Acceptance, the Guaranteed Credit Approval process is designed to issue customer approvals for non-prime loans in an average of 45 seconds by culling primary data from all credit rating bureaus and sources. Use of that system can add about $2,300 to a single deal in upfront and back-end profit, says McCluskey.

The 42-year old McCluskey told F&I Management and Technology Magazine that the CAPS system was instrumental in completing 86 percent of Credit Acceptance’s loan originations in May. “Its success is helping sign up partners among franchised and independent dealers for the new exclusive-territories network,” he said. “We only need 3 percent of the dealers in any market, and so far we’re well along in our desire to get the best 3 percent, including UnitedAuto Group’s Arkansas platform of nine stores, AutoNation dealerships in South Texas and the Burt network in the Denver market.”

McCluskey and Credit Acceptance’s new CEO, former CAC CFO Brett A. Roberts, 35, expect big gains from Ford Credit’s decision to fold its Fairlane Credit nonprime subsidiary this summer. “We’ve had many inquiries from top Ford and Lincoln Mercury dealers,” McCluskey said. “And, as Don Foss and I go out on interview tours every week, our appointment book is filled. Franchised dealers especially like the idea of having an exclusive territory for their subprime business, which is growing in all 50 states.”

Cost of a Credit Acceptance franchise and territory is $9,850, for which the franchisee dealer gets a merchandising kit including a large exterior GCA sign and a large showroom poster headlined: “3 Years, 36 Payments, 1 Fresh Start.”

McCluskey says the franchise has no time limit nor any sole-provider restriction. “Being an exclusive Credit Acceptance GCA dealer for only $9,850 in your territory is a major advantage,” McCluskey asserts.

As a Chevrolet dealer in Ohio’s Queen City who has offered Credit Acceptance loans since 1989, McCluskey calculates he has generated more than $20 million in incremental gross profit thanks to the connection. McCluskey Chevrolet’s used-vehicle sales grew from 10 a month to more than 400 a month currently, and the store is Ohio’s No. 1 Chevrolet truck retailer. For the first quarter of 2002, Roberts reported a rise in CAC total revenue to $38.7 million from $34.7 million a year earlier. Net income eased to $6.3 million from $6.5 million.

The company ceased a pioneering three-year-old program of offering nonprime vehicle leases, citing residual-value resale losses that had necessitated write-downs in 2000 and 2001. In 2001, Credit Acceptance originated 62,675 loans in North America, compared to 47,260, a jump of 32 percent, with 1,170 dealer associates.

In a newly-enlarged merchandising program, focused on the theme, “We change lives!,” Credit Acceptance says it will insist on more stringent standards from its reorganized dealership network.

Credit Acceptance, which also is active in the United Kingdom market, expects profitability to remain on the upside through 2002, according to Roberts, who joined the company in 1991.

Credit Acceptance Corp. stock is traded on the NASDAQ market.