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GO Financial Exits Indirect Channel

May 12, 2016

By Gregory Arroyo

MESA, Ariz. — Effective Wednesday, subprime auto finance source GO Financial is no longer originating new business through the indirect financing channel. Company President Colin Bachinsky stressed the move was unrelated to conditions in the subprime auto finance arena or the performance of the company’s portfolio.

Posted this morning on the company’s online dealer portal was a notice that GO is no longer accepting finance applications. Bachinsky said the company will continue to process deals submitted in the “last several days,” noting that those deals will be verified and funded in the next several weeks, or through May 27. GO Financial will also retain its servicing platform, meaning that nothing will change for the firm’s current borrowers.

“The rumors are true; GO is going to cease originating new business,” Bachinsky told F&I and Showroom yesterday during a phone interview.

Asked if the decision was based on the company’s view of the asset-back securities market, the executive said it is “not at all an indication of our sentiment of the ABS market.” He noted that the two public deals the company completed last year are performing better than the assumptions made by ratings agencies at the time of their inception, adding that there has been no deterioration of the company’s portfolio.

“So it’s really a choice by our owner (Ernest Garcia) to reallocate capital to other core businesses,” Bachinsky said. “We have plenty of room in our warehouse line, so it has nothing to do with that. This was a capital-allocation decision.”

Bachinsky said the move is partly connected to Cox Automotive’s purchase of Dealertrack last October. “There was some channel conflict with regards to GO Financial and SilverRock,” he said, noting that Cox had expressed concern that other finance sources on Dealertrack’s credit application platform might view its ownership of GO Financial and SilverRock as a conflict of interest.

In February 2014, Manheim, which is owned by Cox, purchased an equity stake in GO Financial. A year later, the company purchased an additional equity interest in the company. This past December, Cox acquired a minority interest in SilverRock Holdings LLC, which administors a line of F&I products and is majority owned by Garcia and Ray Fidel through Oreno Holdings Inc. Garcia also owns DriveTime Automotive Group, which operates more than 139 dealerships in 24 states and is a majority owner in online retailer Carvana.

“It was not like Cox put us on notice,” Bachinsky said. “As they made the investment into Dealertrack, the discussion came up with our ownership group. [Cox] didn’t want to jeopardize that investment.”

Garcia agreed to repurchase Cox’s interest in GO Financial and SilverRock. But rather than make the capital investments required to continue operating in the indirect financing channel, Garcia decided to redirect capital away from GO Financial to his other businesses.

A company spokesperson said SilverRock is not affected by the company's decision, noting that it remains one of the core businesses under DriveTime Automotive Group. Cox had planned to offer SilverRock's F&I produt line to Go Financial and NextGear dealers. "They are continuing to build their sales force and building their own F&I product business," the spokesperson said in a email.

Founded in 2011 as a spinoff company of Tempe-based DriveTime Automotive, GO Financial's 2015 originations totaled 47,500. This past November, the company moved into its current headquarters in Mesa, Ariz., with a plan to hire at least 200 additional employees over the next two years. The company employed approximately 530 people.

“The good news is we’re part of a larger group of companies,” Bachinsky said, noting that more than 90% of GO Financial’s employees will be repositioned within the group. “We are retaining our servicing platform under GO Financial, so there will be zero changes to the portfolio servicing. Same people, same process.”

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