In this story the ugly duckling changes into DriveTime Automotive. Formerly known as Ugly Duckling, the company is a used-car dealership chain that primarily targets low-income customers and those with credit problems. To cater to subprime clients, it's a "buy here-pay here" dealer, meaning it finances and services car loans rather than using outside lenders. DriveTime operates some 90 dealerships located in 30 metropolitan areas in about 15 mostly southern and western states. It reconditions cars at more than a dozen of its own facilities. The cars undergo a 53-point inspection and are run through Experian AutoCheck. DriveTime, owned by chairman Ernest Garcia II, filed in 2010 to go public.
Garcia owns the dealership chain through his Verde Investments firm. DriveTime plans to use the proceeds from going public to pay back more than $35 million in loans extended by Verde and about $2 million in loans from president and CEO Raymond Fidel. The company also hopes to raise up to $10 million to purchase properties it currently leases.
As part of its business model, the car chain acquires its vehicles through auctions. In 2010 DriveTime purchased about 53,000 vehicles through some 160 auctions held nationwide. Indeed, the car company increased its unit sales by about 6% vs. 2009 numbers. The company expects to sell between 60,000 to 64,000 used cars this year.
More cars sold means more money in its pocket. Revenue rose by 8% in 2010 vs. 2009. To ensure it's able to reach more potential and return consumers, DriveTime has been opening new stores nationwide. In 2010 the company expanded its network with 10 new stores in new geographic regions in Alabama, Oklahoma, South Carolina, and Tennessee. It's also working to rebrand its existing dealerships to be consistent with the brand-new dealerships.
DriveTime's intention to go public came on the heels of the US government's "Cash for Clunkers" program, which during 2009 spurred car owners to trade in their older vehicles for more efficient, newer ones. The effort was meant to kickstart auto sales and breathe life back into the auto industry. For DriveTime, which is in the business of refurbishing, selling, and financing used cars, the government program gave the car chain more wheels to work with.
The company's looking to further cash in on the used car market and benefit from a subprime customer base that has grown because of the economic downturn and high unemployment. DriveTime's long-term strategic goal is to expand its network of dealerships throughout the US, targeting metropolitan areas with populations of 500,000 to 3 million residents.
DriveTime's financing business operates under the name DT Acceptance Corporation (DTAC). The unit generates about a quarter of the company's total revenue. – less