Is Chrysler Chasing a Captive?

I don’t fancy myself a chess grandmaster, but I really enjoy playing the game. One of my biggest shortcomings is my inability to see that many moves ahead. I can see one or two moves ahead, but the truly great chess players can see the game a dozen or more moves in advance. 

I like playing chess because the skills you hone in chess are truly applicable in the business world. Foresight, for example, is a skill that comes in very handy in the real world. 

It is with that foresight in mind that I read and re-read the news about Chrysler Group teaming up with Chase Auto Finance to offer subvented financing. Why Chase? And why now? 

Chrysler Group has had a “preferred” lender arrangement with Ally Financial since Chrysler shuttered its captive financing arm. Subvented originations were more than 60% lower in the second quarter than a year ago between Ally and Chrysler, according to an Automotive News article. 

So Chrysler needed another entity through which it could originated subvented loans and leases. But why choose Chase?

Perhaps because Chase has a custom finance unit that originates loans and leases on a private label basis for a number of manufacturers, including Mazda, Jaguar, and Land Rover. 

Looking a few moves ahead, the arrangement between Chase and Chrysler could be the first step toward Chrysler Group ultimately building its own captive financing company, perhaps with a stop in Chase’s custom finance unit as the logical next step.

Chrysler needs a financing arm. Paying someone to originate subvented contracts is not a viable long-term solution. It appears as though this week’s news is the first step toward making that a reality.