SARNIA, Ontario — A Canadian auto finance expert has announced the launch of Integrated Depreciation, a patented process which may allow nonprime and subprime customers to take advantage of zero-percent financing offers. The inventor, Tom Comstock, believes that his process will enable captive lenders to capture a growing market even as credit requirements and advances tighten.

“Integrated Depreciation is not a bailout,” Comstock told Special Finance. “It’s a lender’s way out. We've all seen the cycles the economy has gone through over the years. Times get tough, interest rates rise, repossessions double and most lenders tighten their belts. The reaction tends to make the downward spiral seem endless.”

By applying a mathematical algorithm that couples a customer’s inherent risk level with their vehicle’s expected rate of depreciation, Integrated Depreciation applies an interest-rate increase designed to insure the lender against any loss in the event of a repossession, subject to accepted underwriting guidelines.

A typical loan may see 1.23%, 2.96% or 3.44% added to the zero percent base with no net expense affect to the lender; and losses covered by the plan would include difference in value, three consecutive missed payments, bailiff fees, impound fees and minor reconditioning, according to the inventor.

“Integrated Depreciation is ideally suited for subprime and nonprime customers, typically from a credit score of 585 to 699,” Comstock said. “Given what the housing crunch has precipitated, there are few households not impacted negatively. Credit scores are on the decline and lenders have raised the bar to almost an elite level. Integrated Depreciation allows the lender to dig a little deeper with no risk.”