With more than $25 billion of financing at stake, Chrysler’s retail and floorplan business has sparked interest from some of the nation’s largest lenders. Among the contenders are Ally Financial Inc., Chase Auto Finance, GE Capital Corp., Santander Consumer USA, US Bancorp, and Wells Fargo & Co.
Chrysler CEO Sergio Marchionne has opened the bidding for two possible scenarios: a captive-type joint venture or a private-label lending arrangement.
Here’s a look at the candidates:
Ally Financial
Ally currently provides wholesale financing to Chrysler dealers, plus 36% of Chrysler’s loans and some leases. The mega-financier also has “preferred lending” arrangements with General Motors, Maserati, Saab, Suzuki, Thor Industries, and Vehicle Production Group. It finances new and used vehicles, and offers insurance products and remarketing services for auto and RV dealers. On the downside, it has a below-investment-grade rating, and legacy mortgage issues have sidelined its IPO.
Chase Auto Finance
Like Ally, Chase Auto has an existing agreement with Chrysler, providing retail subvented financing to Chrysler, Jeep, Dodge, Ram, and Fiat dealers since last fall. Chase also runs private-label financing for Jaguar, Land Rover, Mazda, and Subaru, and offers subvented financing for Aston-Martin.
GE Capital
GE Capital exited the retail auto finance space in the U.S. more than a decade ago, but the financial services firm is interested in Chrysler’s commercial leasing and fleet financing business, according to published reports.
Santander Consumer USA
Santander inked a deal with Chrysler back in 2010 to provide subprime financing, subsidized by the carmaker, to consumers with nonprime credit. Santander has largely grown by acquisition in recent years, acquiring $3.2 billion of CitiFinancial Auto’s loan portfolio in 2010 and managing another $7.2 billion of Citi’s auto loans. In 2009, Santander bought HSBC Finance Corp.’s auto loan servicing business and $1 billion of receivables; it also bought lender Triad Financial.
US Bank
US Bank has been a primary player in the leasing space since Chrysler and GM filed for bankruptcy in 2009. The bank has provided Chrysler, Dodge, and Jeep leases since September 2010 and, according to published reports, is willing to offer Chrysler-branded loans.
Wells Fargo
Earlier this month, Wells Fargo Dealer Services agreed to a subsidized financing program in GM’s western region. Along with retail subvention, Wells Fargo will offer Chevrolet, Buick, GMC, and Cadillac dealers inventory financing, treasury services, and insurance. Seems like the bank could offer similar services for Chrysler.
What are my thoughts? There’s a lot of mixing and matching that could take place with this roster of lenders. My best guess at this point is that Marchionne will seek to replace Ally ― no matter how solid its performance ― for the simple reason that he wants to choose the company’s financing partner rather than have a strategy directed by the U.S. government.
If Chrysler goes the private-label route, I think Chase Auto will be the best candidate. Chase continues to add to its roster of private-label partners, offering retail and commercial services along with some customized reward programs.
Should Chrysler opt for a captive financing model, I’m guessing the scenario would look similar to GM’s hub-and-spoke arrangement with AmeriCredit. Essentially, AmeriCredit serves as the captive’s base ― its hub, so to speak ― and a handful of other providers offer additional services. I could envision US Bank offering loans and leases, GE Capital with fleet financing, and Santander with the nonprime piece.
What are your thoughts? Which path will Chrysler take, and with which lenders?
