What Franchise Dealers Should Know about Subprime Financing

Franchise car dealership serving subprime customers

While offering subprime auto financing may not seem necessary for your franchise car dealership, it can mean more for your car sales than you may give it credit for—pun fully intended. If your dealership currently does not offer subprime financing, you’re turning away potential car buyers who may not have the credit scores necessary to qualify for traditional vehicle financing. In other words, you’re losing car sales.

There is a substantial number of U.S. adults who have low credit scores. The most recent research from Experian suggests that approximately 34 percent of consumers fell into the subprime FICO® credit score range in 2019. Millennials, who currently represent America's largest generation of adults, are experiencing higher credit denial rates than older generations. According to a Bankrate.com survey of 2,500 U.S. adults, 58 percent of millennials have been denied approval for credit cards and/or car loans because of having low credit scores. Since there is an entire market of credit-challenged car buyers who are in need of credit approval, franchise car dealers may want to consider offering subprime auto financing for consumers who have bad credit or no credit established.


Understanding Subprime Auto Financing

Subprime auto financing is credit available to car buyers whose credit scores are in the non-prime or subprime ranges. According to Experian, FICO® credit scores in this range generally fall between 580 and 669. Because franchise dealers typically work with car buyers who have prime and super-prime credit scores (670 to 850), there is a common misconception that they can only finance older, high-mileage vehicles through a subprime auto finance company.

That is a false assumption. In fact, car dealers that are enrolled in Credit Acceptance’s subprime auto finance programs are able to finance nearly any vehicle through our program, including new cars.


Advantages of Offering Subprime Auto Financing

On top of being able to finance any age, make or model vehicle, franchise car dealers that offer subprime auto financing through our program also have the ability to offer credit approval to consumers who may not qualify for traditional vehicle financing. This gives you the ability to approve every potential car buyer who walks into your dealership. A few additional advantages of working with a subprime finance company like Credit Acceptance include:


  • Competitive advances: Car dealers enrolled in our auto finance programs receive upfront advances, which can be used to cover business expenses and/or invest in more inventory.

  • Same-day funding with eContracting: With eContracting, car dealers enrolled in the Credit Acceptance program can receive same-day funding. Processing begins as soon as the contract package and funding proofs are electronically submitted and approved by Credit Acceptance.

  • Seamless integration with Dealertrack®, RouteOne® and other lead aggregators: Credit Acceptance is integrated with a number of lead aggregators, helping to maximize efficiency by reducing double entry and facilitating a seamless car-buying experience for consumers with bad credit or no credit.


If you’re a franchise car dealer looking to expand your customer base and increase your car sales, Credit Acceptance can help. Sign up on our Become a Dealer page to learn more about our subprime auto finance programs.