[DesertCat]

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Buffett constantly talks about finding businesses that serve a repetitive need and have a durable competitive advantage that will cause the company to produce monopoly like profits in the long run. NICK does serve a repetitive need, buying auto debt, but what is it's durable competitive advantage? If I was a used car dealer and wanted to sell off some outstanding debt I don't see any reason why I would accept a lower bid from NICK than a slightly higher bid from one of NICK's competitors.

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What I believe to be NICK's competitive barrier is their unique credit scoring and local branch offices. This "hands on" approach allow them to better determine which borrowers are lower risk, and which dealers offer better paper. And they can also do a better job of follow-up with borrowers to minimize the default ratio. Whereas the "big guys" might followup with a call (that you duck) or a letter (that you toss) when a payment is late, the NICK guys know where you work, who your references are, and they'll immediately want to talk to you. The big guys typically outsource vehicle recovery, whereas a NICK manager may do it himself.

This advantage allows NICK to "pay more" for a dealers client knowing that the client is a better risk than traditional scoring indicates, and avoid writing loans to clients who are worse. A dealer may not be able to get anyone to write a loan to a customer except NICK, if their credit scores are too low.

It's not a traditional "moat", but it seems very effective. And it's difficult to duplicate, because competitors don't want to invest the time and capital building their own branch office network. Their approaches are heavy on automation, which produces lower costs, but also higher losses.