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Hear the word subprime and you'll likely find many scared investors. But when it comes to DriveTime Automotive, the company has found a way to make money from this market segment -- at least for used auto sales.
And now the company has filed to go public. The offering is for up to $200 million.
For roughly 17 years, DriveTime has built an integrated business model. First, the company gets its inventory mostly from used car auctions and has a 26 full-time buyers. Next, DriveTime reconditions the cars based on a multi-point inspection system. The average cost is roughly $1,000 per vehicle.
Then comes the financing. And it is highly sophisticated, involving rigorous scoring as well as real-time management of the portfolio. Moreover, DriveTime handles servicing and collections.
Finally, there is after-sale support. This includes a warranty program of 36 months/36,000 miles (including oil changes and 24/7 roadside assistance).
So far, DriveTime's network consists of 77 dealerships and 13 reconditioning facilities across ten states. In terms of the financials, the company sold 40,025 vehicles during the first nine months of last year, coming to $752.9 million. Earnings were $29.6 million.
While the recession has certainly impacted DriveTime, the fact remains that the company's target market is large and can be lucrative -- especially as the economic environment continues to improve.
The underwriters on the IPO include Jefferies (JEF) and Stephens.
Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
2-03-2010 @ 2:47PM
boston41 said...
I am a DriveTime "client". Their company was founded by a man who was federally indicted in the 1980's savings and loan scheme. It is a horrible, horrible place to do business. They charge userous amounts of principal and interest for autos that are crap and when people can't afford to make the payments their collection tactics are extreme. They will call your neighbors when you are one week past due or your ailing parents. They have no morals. DO NOT INVEST IN THIS IPO....THEY ARE GOING DOWN. They are currently being sued by CarMax for organized crime allegations. Just check Ripoff Report.Com!!! The company is PURE EVIL and so are every one of their employees, many of whom are probably illegel aliens. They may get business of the desperate and unemployed but they won't ever get repeat or referral business. I would rather shoot myself in the head...and I'm totally serious, than do business with these snakes again.
2-04-2010 @ 10:46AM
JOHNNYNAUSTIN said...
I HAVE NOTHING GOOD TO SAY ABOUT THEM.
3-08-2010 @ 2:00PM
mrlongsocks said...
whoa, settle down there guys. i dealt with this company a few years ago. was it a walk in the park? no. but fact is, you get what you pay for and deserve. my credit was shite. i made a lot of bad decisions. and i wasn't exactly walking into a mercedes dealer anytime soon. since then, i've recovered a bit and i've done some research on the company. they are dealing with people who for one reason or the other can't get approved anywhere else. they may default on loans repeatedly, have criminal records, have collection agencies after them, etc...it's not exactly a walk in the park for them either. and they're not running a charity. so grow up and take your medicine.