DriveTime
| Company type | Private |
|---|---|
| Industry | Used car retail, automotive financing |
| Predecessor | Ugly Duckling |
| Founded | 1977 (as Ugly Duckling) |
| Founder | Thomas S. Duck, Sr. |
| Headquarters | Tempe, Arizona , United States |
Area served | United States |
Key people | Ernest Garcia II (Chairman), Ray Fidel (former CEO) |
| Products | Used cars, automotive financing |
Number of employees | 3,800 (2018) |
DriveTime Automotive Group Inc. is a U.S.-based retailer specializing in used automobiles and automotive financing, with its main office located in Tempe, Arizona. Previously operating under the name Ugly Duckling until 2002, the firm markets and finances pre-owned vehicles across the country. It has developed several affiliated enterprises, including Carvana, GO Financial, SilverRock Group, and Bridgecrest Acceptance Corporation. By 2018, DriveTime managed roughly 145 dealerships and employed about 3,800 staff members.
Operations
As a privately owned enterprise, DriveTime concentrates on offering used cars through a proprietary credit evaluation system that facilitates in-house financing options, including loans for subprime borrowers. The company acquires nearly 150,000 vehicles annually at auctions, subjects them to a two-week inspection process at 24 different facilities, and performs necessary repairs before putting them up for sale. Approximately 8% of these auctioned cars fail to meet inspection standards and are removed from inventory.
DriveTime is under the ownership of chairman Ernest Garcia II—who took over Ugly Duckling in 1991—and former CEO Ray Fidel. The company operates about 138 locations across the United States. In addition to its headquarters in Tempe, it runs a customer service center in Mesa, Arizona and a collections office in Dallas, Texas. The organization also promotes entrepreneurial initiatives among its workforce through internal startup programs.
In 2014, DriveTime generated $2 billion in revenue and was ranked 3,793 on the Inc. 5000 list of fastest-growing companies while expanding its workforce by more than 1,190 employees that year. Additionally, it earned the No. 15 spot on Computerworld’s 2015 Best Places to Work in IT rankings.
Ugly Duckling
The origins of DriveTime trace back to Ugly Duckling, a rental car company founded in Tucson in 1977 by Thomas S. Duck, Sr., who had a background in insurance sales. By 1985, Ugly Duckling had become the fifth-largest rental car operation in the U.S., boasting 600 franchise locations. Nevertheless, the firm filed for bankruptcy protection in 1989. In 1990, Ernest Garcia II—a University of Arizona business alumnus and entrepreneur with a contentious history—acquired the assets of Ugly Duckling through Duck Ventures, Inc., eventually establishing Ugly Duckling Holdings, Inc.
By 1992, Ugly Duckling was managing two dealerships and expanded its footprint by purchasing three additional locations while launching four new outlets. The company sought to elevate its reputation beyond the typical subprime dealership image. Although it briefly tested offering higher-end vehicles, that venture was discontinued by 1995. The acquisition of Champion Financial Services in 1994 broadened its revenue base by acquiring installment contracts from higher-tier subprime clientele.
Ugly Duckling introduced innovative financing solutions such as allowing customers to apply tax refunds toward down payments and issuing Visa credit cards backed by deposits. It rewarded punctual payments with down payment rebates and accepted cash payments—features that set it apart within subprime auto retail.
In 1996, Garcia took Ugly Duckling public on NASDAQ under the symbol "UGLY," raising $170 million to support growth initiatives. Concurrently, the company began phasing out its rental car operations by gradually shutting down franchises over the following decade. GE Capital increased its credit facility to $100 million that year, facilitating acquisitions including five dealerships and $25 million worth of finance contracts from Seminole Capital Corporation in Florida as well as assets from E-Z Plan Inc. based in Texas. Expansion also extended into Nevada and New Mexico.
By 1997, Ugly Duckling operated 24 dealerships across five states alongside 64 branches spanning 17 states. Champion Financial Services acquired contracts from more than 2,700 dealers via these branches. To address mandatory casualty insurance requirements on many contracts, Ugly Duckling entered the insurance sector through Drake Insurance Agency in partnership with American Bankers Insurance Group.
In 1996, Ugly Duckling established Cygnet Finance to offer credit solutions for dealers unable to secure traditional financing. The company experienced rapid growth during this period; employment surged from 652 to 1,776 within nine months of 1997. Financing activities became an increasingly significant revenue contributor, prompting The Washington Post to describe Ugly Duckling as "a bank masquerading as a used-car lot."
By 1999, Ugly Duckling exited direct financing operations; Garcia acquired Cygnet Finance and discontinued Champion Financial Services while developing proprietary software systems to support dealer acquisitions. Market expansion included entry into areas such as Orlando and Richmond.
In 2001, sales climbed to $541.7 million and corporate headquarters were relocated to a former Mega Foods grocery facility. Ray Fidel joined as president and CEO during preparations for taking the company private again—a strategic leadership transition aimed at accelerating growth and enhancing market presence.
DriveTime
By January 2002, Garcia had acquired a 65 percent stake in Duckling and, together with Sullivan, purchased the remaining shares later that year. To differentiate itself from an educational business with a similar name, the company was rebranded as DriveTime Automotive Group on September 1, 2002. At that point, DriveTime operated 76 dealerships across eight states and pursued a strategy for nationwide expansion. Advertising efforts were handled by O'Leary and Partners starting in 2003.
Prior to founding DriveTime, Garcia and Fidel were implicated in the Lincoln Savings and Loan scandal during the savings and loan crisis. Both admitted guilt to fraud charges in the early 1990s and received probation sentences. Their cooperation was instrumental in securing the conviction of Charles Keating.
On November 2, 2004, DriveTime revealed intentions to grow its footprint from 75 to 100 dealerships within two years, concentrating on markets in the Southwest, Florida, Georgia, and Virginia. At that time, the company employed approximately 2,100 staff members and reported revenues of $729 million. Chairman Garcia held an 85 percent ownership stake, positioning DriveTime as Arizona’s largest Latino-owned enterprise. Former CEO Ray Fidel highlighted the company's commitment to treating customers facing financial difficulties as valued clients.
By 2005, DriveTime had expanded its presence into Austin, Texas; Norfolk, Virginia; and announced plans for locations in Charlotte, North Carolina and Nashville, Tennessee. Industry accolades followed as Fidel was recognized as the leading independent retailer by Auto Dealer Monthly and AutoTrader.com. By late 2006, DriveTime operated more than 90 dealerships across nine states. The company celebrated opening its 100th dealership in Concord, North Carolina in 2007 while simultaneously inaugurating a new loan-servicing center in Mesa, Arizona.
CarMax initiated legal action against DriveTime alleging that the company provided kickbacks to sales personnel for customer referrals—a charge DriveTime denied and pledged to contest vigorously.
DriveTime fostered internal innovation by launching GO Financial in 2011 as a subprime retail financing division that subsequently became a separate entity. In 2013, DriveTime expanded its digital presence by introducing Carvana, an online used car retailer headed by Ernie Garcia Jr.
In November 2014, the Consumer Financial Protection Bureau imposed an $8 million fine on DriveTime for abusive debt collection practices such as excessive phone calls and inaccurate credit reporting. This enforcement marked the CFPB’s first action against a "buy here, pay here" business model. DriveTime consented to pay the fine and agreed to reform its collection procedures under five years of CFPB supervision.
Since its founding, DriveTime has been headquartered in Phoenix but moved to a new 97,000-square-foot facility in Tempe in November 2015; Carvana took over its previous Phoenix location. That same year saw the creation of SilverRock Group—an insurance and warranty provider based in Tempe partially owned by Cox Automotive—as a spin-off from DriveTime.
By 2015, DriveTime operated more than 130 dealerships nationwide; this number increased to 145 by 2018. In 2017, the company adjusted its business strategy to emphasize newer vehicles with lower mileage to strengthen its competitive position and appeal in the market.
Bridgecrest Acceptance Corporation
Established by DriveTime in April 2016, Bridgecrest manages installment contract servicing for DriveTime and related entities. This spin-off transferred responsibility for servicing over 220,000 customers formerly handled by DriveTime Acceptance Corp to Bridgecrest.
Carvana
In 2013, DriveTime acquired a controlling stake in Carvana, which continues to operate as an independent entity. Established in 2012 and expanding nationwide by 2013, Carvana is an online used vehicle retailer headquartered in Phoenix. Through its website, customers can explore available inventory, secure financing, and schedule either delivery or pickup. A distinctive feature of Carvana's customer experience includes the deployment of car vending machines in metropolitan areas such as Atlanta and Nashville. The company benefits from DriveTime’s existing service infrastructure to support its business operations.
GO Financial
Founded in 2011 and based in Mesa, Arizona, Go Financial specializes in providing subprime loan financing. It became a standalone company in 2013 following a spin-off and attracted investment from Cox Enterprises, the parent company of AutoTrader.com and Kelley Blue Book. Before halting new loan originations in May 2016, Go Financial served approximately 2,800 dealerships across 46 states.
SilverRock Group
SilverRock Group, which separated from DriveTime in June 2015 and is located in Tempe, Arizona, delivers auto insurance products, vehicle service contracts, and extended warranty plans. With a workforce of around 185 employees, the company aims to grow its offerings within the automotive finance market.