BMO Harris Eyes Dealer Finance Expansion

BMO Harris Bank is fostering greater collaboration between its retail consumer auto loan business and commercial dealer finance arm in search of opportunities to extend credit to dealerships in the U.S., Craig Harter, head of the company’s indirect auto finance group, told Auto Finance News.

The added cooperation between the two wings of the Chicago-based bank comes as it shifts to a three-tiered flat rate dealer compensation model, rather than a single 3% flat rate.

“We want to take advantage of the success [the dealer finance group] has had across other markets,” Harter said. “We feel we have done a very good job of managing the dealers we’ve had and enjoyed a consistent return over the years. But we feel — as we’ve seen other players retract from the market — that we have a great opportunity to better our business strategy with our commercial partners to get into some of the markets where they’re doing business. We want to make sure we’re providing the right opportunities and the right business for their customers.”

While BMO Harris has been in the dealer finance business for 30 years in Canada, it only entered the U.S. market in 2010, during a period when many banks were pulling back capital in the wake of the recession, Ghram Debes, head of the company’s dealer finance group, told AFN. Now BMO Harris has clients in 29 states and is looking to expand in a healthy but fragmented market.

One way BMO Harris is encouraging dealer growth is through an acquisition financing program, where dealers with two or three stores can acquire funds to add another store.

“We have credit available and are looking at a nice sized pipeline of new opportunities, and we [want] to partner with dealers who are looking to grow themselves,” Debes said. “There is this conversion of a certain amount of dealers who are wanting to sell. There is a level of complexity that has come into the industry; dealers have not wanted to invest and really take on that complexity, so they look for a way out, which is to sell. Then there are larger dealers looking to get larger.”