Bank of America is the finance provider for Volvo Cars’ new subscription service launched late last year, David Hollodick, the bank’s senior vice president of consumer vehicle lending, told Auto Finance News.
All of Volvo Car Financial Services’ loan and lease originations end up on Bank of America’s balance sheet, Hollodick explained, including subscriptions to Care by Volvo, which starts at $600 a month for an XC40 compact crossover.
Hollodick is “excited” that Bank of America is one of the few banks invested in the subscription leasing space, because these models are “clearly a threat” to traditional consumer lending, he said.
“If people are using mobility or subscriptions, they aren’t borrowing money to get into those programs so that’s a threat to the model,” he said. “But then the question becomes, from a bank perspective, does the funding simply shift [to commercial lending]?”
Unlike a traditional lease, Care by Volvo includes insurance and maintenance coverage and does not require a down payment. However, in contrast to other competitors in the subscription space that allow for monthly lease deals and frequent swapping of cars, Volvo will require term limits as long as two years with the option to switch models after one year.
BMW Group and Mercedes-Benz are expected to launch subscription services later this year, yet banks have been largely absent from the subscription conversation.
“Banks can play on both sides of the fence, it just moves from one side of the business to the other,” Hollodick said. “Maybe banks’ balance sheets aren’t impacted, but how they lend the money changes over time.”
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