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A new-car dealer family started it when the major lenders were turning their backs on solid citizens seeking affordable used wheels.

Now J.D. Byrider Systems, highlighting dealer-carried financing in a modern building, is reaping substantial profits on older-model used vehicles for franchised new-car dealers and a newer crop of outside investors.

Like the Drivers' Mart and Car America concepts launched on late-model cars and trucks, Indianapolis-based J.D. Byrider gives franchised dealers their own rebuttal businesses to the invasion mounted by outside megabucks types into the fast-growing pre-owned industry.

As Byrider franchise development chief Ryan P. DeVoe puts it, "I'd open a J.D. Byrider across the street from a CarMax in a flash. We're two totally different businesses, but our Byriders should make more money than the CarMaxes and are doing so."

Bob Pulliam, owner of Pulliam Ford, Columbia, S.C., readily agrees with DeVoe, son of Byrider Chairman James F. DeVoe, Sr., second-generation principal of DeVoe Chevrolet-Cadillac, Marion, Ind.

Pulliam's two Byriders in the South Carolina capital in four years have amassed 1,500 customers, $4.5 million in self-financed receivables and 10 upgrade buyers a month for his Ford store.

"The profits are better at the J.D. Byriders because we hold our own financing and the delinquency rate is less than 10 percent," says Pulliam. "The buy-here/pay-here concept at Byrider is key, but it takes a heap more investment to yield the highest return on any franchise I know of, including hamburgers."

Byrider asks $29,000 for a territory franchise, but a building valued at $350,000-plus and financing-company reserves of at least that much could bring the seed-money to $500,000-$700,000, says Pulliam.

"It's not a business to enter lightly," says the Ford dealer, "but the rewards can be great because so many so-called 'subprime' customers are out there looking for decent low-priced cars. The captive lenders have not supported this segment and subprime loan independents often are erratic in their acceptance policies and high-priced.

"Our experience, and that of nearly all new-car dealers doing their 'own thing' in this market, has been positive with a J.D. Byrider or a comparable setup selling older useds with self-financing."

Counter-attack strategies such as Car America and J.D. Byrider, wherein dealers ward off the superstores with their own start-up programs, have been buttressed by automaker-sponsored certification campaigns on cars at least two years old.

Started by Cadillac, Saturn and a number of luxury imports, the certification trend has this year added Lincoln and Ford. A six-month pilot program called "Lincoln Assured" began last summer in Dallas-Fort Worth, Atlanta, St. Louis and the Tampa Bay area of Florida. Ford was expected to roll out a national effort in October.

With new-vehicle prices rising steeply on 1997 models and expanding the "affordability" gap, more and more dealers are showcasing certified off-lease or program units in their showrooms next to their "brand new" pieces. Several major auto shows this season, moreover, for the first time will display factory-certified useds on their turntables.

Under the Lincoln-Mercury certification plan, only previously leased Lincolns driven by a single owner, are being included in the four pilot markets. Rental fleet cars and those with poor repair histories are excluded.

"We need to be competitive," says Mitchell Dale, Ford National Dealer Council Chairman and general manager of McRee Ford, Dickinson, Texas. "A certification program gives used-car customers the same assurance they get with factory warranties on new cars."

The used Lincolns certified by the factory get minimum warranty coverage of two years/24,000 miles, or whatever is left of the original five-year/50,000-mile warranty.

Pioneered by Audi and Mercedes-Benz in 1989 and 1990, certification programs now are offered by Infiniti, Jaguar, Lexus, Nissan, Toyota, Volkswagen and Volvo.

One of the major attractions offered for the J.D. Byrider Systems franchise is the "economies of scale" saving offered in production and distribution of TV video and radio commercials aimed squarely at prospects whose credit has been found subpar by major lenders, plus a Byrider warranty and in-house financing.

J.D. Byrider has issued 85 franchises so far and plans approximately 200 across the country by 1999, including 15 owned by the company or its executive personnel, according to Ryan DeVoe. The company's Car Now Acceptance Corp. (CNAC) is the financing avenue available to Byrider franchisees, of whom nine out of 10 already have gone to second or third operations, according to DeVoe.

"In the seven years since we put up the first Byrider here in 1989," says DeVoe, "we have had a zero franchise loss rate. The facts are that 50 percent of consumers are turned down for used-car loans and 65 percent are unhappy with their purchases or some aspect of the sales process. They need J.D. Byrider to get decent cars.

"Our 6,000-square-foot buildings include 1,000 feet devoted to a finance office and a minimum of five service bays. That's a far cry from the mom-and-pop used-car lots most customers are used to, and a reason a big Chrysler Corp. megadealer like Doug Moreland out in Colorado has built four Byriders in the Denver-Colorado Springs market. We're a good fit for a new-car dealer."

However, the concept is obviously open to dealers who prefer to do it themselves, including the self-financing. Suburban Detroit multi-franchise dealer Mel Farr, who already had his own financing company, opened a used-car store this past summer in a retrofitted food supermarket two miles from his high-volume Ford outlet.

Byrider has begun awarding franchises to non-new-car-dealers, a policy not all its dealer franchisees endorse, on the ground that, as one franchisee says, "experienced car guys will be better at handling inventories in crunch times, which is the case with CarMaxes, as well." But Byrider's founding chairman, Jim DeVoe, Sr., believes "our franchise is such a complete package" outside investors can be taken on, especially those with experience with other national franchises, such as Blockbuster Video, Midas Muffler and Toys R Us.

Whether they're stocking an average of 75 to 100 pre-owned four to 10-year-olds, a la Byrider, or 400 to 1,000 late-models, like Car America or the first Driver's Mart in Green Bay, Wis., the thrust has turned from dealer panic over the CarMax inundation to repellent solutions.

Hence, this past summer's headlines, "Auto megadealer trend loses momentum" USA Today piece on slowdown in superstore openings) and "Costs raise doubts about super car lots" (Toronto Star).

The superstore moguls are not going away, what with the billions of dollars at their disposal, as in the case of Blockbuster founder Wayne Huizenga's AutoNation USA/Car Choice and Circuit City's CarMax, but franchised dealers now are adding more viable arrows to their quivers to keep them at bay.

Domestic automaker used-car certification programs, teamed with strongly supported subprime marketing strategies, give the franchise community a powerful weapon against the invaders from Planet Superstore.