Last year, Serent Capital, also of San Francisco, acquired Tricolor Auto Group in Dallas, a chain with $30 million in revenue in 2009. Serent has opened Tricolor locations in Dallas and Fort Worth and has expanded to Houston. Recruitment pamphlets for salespeople tout potential incomes of up to $250,000 a year.
Tricolor advertises aggressively in Spanish-language media. Its television ads feature a rooster dressed in the white, red and green of the Mexican flag, along with the slogan "orgullo en nuestros carros para nuestra gente" — pride in our cars for our people.
Like other Buy Here Pay Here dealers, the chain courts people on the financial edge.
Clara Gonzalez and her husband, Joaquin Ramirez, bought a 2004 Dodge Durango at a Tricolor lot in Dallas. They traded in their 1999 Ford Expedition and put $1,300 down. To come up with the rest of the $17,000 price, they took on a three-year loan at 18.7% interest, according to the sales contract.
Their payment was $250 every two weeks. It was more than they could handle after Ramirez lost his job in construction and Gonzalez — who made $11.75 an hour working in a school cafeteria — became the sole breadwinner.
The couple filed for bankruptcy. They could have gotten out from under the loan, if they were willing to give up the truck.
They weren't, so they cut a deal with Tricolor to keep the Dodge, court records show.
The payment schedule didn't change: $250 every two weeks.
With many Americans struggling financially but still in need of a car, private equity firms see rapid growth in Buy Here Pay Here.
Altamont Capital, the Palo Alto private equity fund, made J.D. Byrider its first acquisition in May and has since opened six lots. Today, the year-old fund owns 20 of the chain's 135 lots and the rest are franchises.
Newly franchised dealerships pay a $50,000 fee upfront, plus 2.5% of their gross monthly sales, among other fees, according to Byrider documents.
The industry's continued prosperity depends on people like Debbie Acevedo, who bought a 2005 Ford Taurus at the Byrider lot in Visalia.
A 58-year-old restaurant manager, Acevedo cashes her paycheck every two weeks and drives straight to the dealership to make her $180 payment in cash. Because the interest rate is nearly 22%, she'll end up paying almost $18,000 over the four-year life of the loan — nearly four times the Kelley Blue Book value of the car when she bought it.
For Acevedo, whose credit was damaged by bad debts on old loans, the monthly payment is a stretch. She can't even afford a phone. But she sees no alternative: Without the car, she wouldn't be able to get to work.