Santander Consumer USA drove up auto originations 59% year over year amid discussions around “optimizing” its current contract with Fiat Chrysler Automobiles Group, SCUSA Chief Executive Scott Powell said during the company’s fourth-quarter earnings call this week.
“We continue to operate under [the] existing contract,” Powell said during the call. “Our discussions with Chrysler are ongoing. I would say they are constructive, and we are talking about a number of things, including optimizing the contract that we have.”
The subprime lender’s auto originations shot up to $6.9 billion in the fourth quarter, compared with $4.3 billion during the prior-year period. Yearend originations increased 43% to $28.8 billion.
Loans originated by subsidiary Chrysler Capital shot up 63% year over year to $2.5 billion, while leases increased 64% to $2.1 billion. Meanwhile, Chrysler Capital’s penetration rate grew to 30% in 2018, from 21% in 2017.
Mark DeVries, a senior research analyst at Barclays, asked during the earnings call if the increased Chrysler Capital penetration rate is a sign that optimizing existing contracts with FCA is “more viable today than it might have been about six months ago,” DeVries said.
Powell’s response: “Yes, I think so. I mean I wouldn’t presume to speak for Chrysler, but I think the progress we’ve made over the last year is pretty significant. They had a really solid sales year, the company is doing really well. And, yes, I think that is part of the discussion.”
One analyst told Auto Finance News that industry trends like lagging new-vehicle sales will likely hamper FCA’s captive plans.
“When sales are at risk for slowing and [interest] rates are rising, it’s crazy to rock the boat and try to implement a new captive,” Jack Micenko, bank and auto finance analyst with Susquehanna Financial Group, said before the earnings call. “Do you really want to start your captive finance arm in this perfect storm environment? I’d say, ‘No way.’”
In May 2018, FCA confirmed in reports that it was considering buying the Chrysler Capital portfolio from Santander Consumer USA to form a U.S. captive finance arm.
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