Chrysler about to sign a new preferred auto lender predicted to increase leasing for dealerships

Article by Christian Andrei, on January 24, 2013

Chrysler Group is about to sign a new preferred auto lender that is predicted to increase leasing for dealerships. The automaker is "in the final stretch" of negotiations with the financial services provider, according to Chrysler-Fiat CEO Sergio Marchionne. He declined to identify this provider. But sources have told The Wall Street Journal that the lender is Banco Santander of Spain.

This lender will be the replacement of Ally Financial Inc. as the main lender to dealers and customers. At the Detroit auto show last week, Marchionne said that the agreement will permit Chrysler dealerships to boost shoppers' leasing options, which in turn can increase auto sales by having more consumers qualify for financing. He said that there's a piece of the market that the company is not presently accessing.

He also said that it doesn’t matter if the deal is done directly or 100% through a provider or in a combination with other sources because the company will be there. According to Reid Bigland, head of U.S. sales, Chrysler has some leasing programs currently but they make up just 10 to 13% of U.S. sales while the industry average is around 20%. He said that there will be “leasing element” in any deal that it has put forward.

He noted that the amount of leasing will rely on the dealers and the market. This arrangement would only affect sales in the U.S. and not in Canada. In July 2008, Chrysler cut leasing under former owner Cerberus Capital Management when financing through Chrysler Financial, Chrysler's previous captive finance arm, disappeared. Chrysler sales plunged without the leasing options.

Since Marchionne took over Chrysler, he has repeatedly said that it doesn’t require a captive finance arm to increase sales, inspite of dealerships wanting an in-house lender. He said that Chrysler has to focus on building profitable vehicles rather than attempting to make profits from auto financing. Marchionne told Automotive News that the new preferred lender will run in same way as other automakers' in-house lenders. It may even use Chrysler in its name.

Topics: chrysler, dealer

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