Santander increases Chrysler penetration rate to 36%

Santander Consumer USA drove up its Chrysler Capital loan origination volume and quarterly penetration rate during the third quarter, an “indication of where we are at with our FCA partnership coming off the amendment we had last quarter,” Chief Executive Scott Powell said during the lender’s earnings call. 

Chrysler Capital’s quarterly penetration rate grew to 35.7%, compared with 31.4% during the prior-year period. Loans originated by subsidiary Chrysler Capital increased 52% year over year to $3.6 billion, while leases dropped 23% to $2.2 billion. 

The subprime lender’s total auto originations increased 11% to $8.4 billion in the third quarter, compared with $7.5 billion during the prior-year period. Meanwhile, 30-day delinquencies decreased 100 basis points to 9.5%, while net charge-offs fell 70 basis points to 8.1% of SCUSA’s portfolio. 

An increase in origination volume is partly due to the amended relationship with FCA, Powell noted. “Also, a big part of [origination growth] is executing the SBNA flow program,” Powell said, referring to an arrangement with Santander Bank NA. “The SBNA flow program helps us — it helps the bank, it helps support our FCA partnership, and it helps us to be more competitive across the full credit spectrum. So as I look at originations growth, it’s really a good story of Chrysler and our core channel.”

In addition to a now blossoming partnership, company Chief Financial Officer Fahmi Karam noted economic factors that have driven growth and lowered delinquencies, like high consumer confidence, an active labor market and lower interest rates. “The environment continues to support a resilient consumer lending environment,” Karam said.

Yet, market competition has resulted in a drop for Chrysler Capital lease originations, Karam said. “Our competition in lease is very limited compared to retail,” he said. “So if one party becomes more aggressive, it impacts our share pretty greatly.” 

In the third quarter, the Dallas-based lender noticed “some credit unions” become “a bit more aggressive” in certain high-lease volume regions of the country, Karam said. “That also impacted the quarterly number.” 

Santander Consumer USA’s stock was trading at $25.03 per share on the New York Stock Exchange at press time, down 1.8%. The company has a market capitalization of $8.51 billion.