Retail panel: Dependable captive lenders are critical
Photo credit: JOE WILSSENS
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New models and hot-selling brands are nice. But what dealers need to keep the auto industry going is a steady source of customer financing from committed lenders, say some of the nation's largest auto retailers.
"We need a finance company," said Tammy Darvish, a second-generation Chrysler dealer and vice president of Darcars Automotive Group in Silver Spring, Md. "You can't sell Ferraris for $10,000 in this country unless you've got a finance company that operates as a marketing arm."
Darvish was part of a dealer panel at the J.D. Power International Automotive Roundtable here Friday.
After GMAC Financial Services took over financing arrangements for most Chrysler dealerships, Darcars had disagreements with GMAC, Darvish said. She stopped using the lender in her 24 stores in metropolitan Washington.
"Chrysler Financial loaned my family $75,000 nearly 40 years ago, and we've never forgotten where we came from," she said. "Even our Toyota and Lexus and Nissan stores were floorplanned through Chrysler Financial, even though we paid more for it."
Sid DeBoer, CEO of publicly traded Lithia Motors Inc., with 86 dealerships, agreed that a committed partnership with a finance company is critical. But he had the opposite experience as Darvish with GMAC.
"I'm very grateful that GMAC was willing to take on flooring of Chrysler products. It saved our company," he said. "They're doing about 50 of our stores now and buying 40 to 50 percent of our business on the new-car side.
"We have about 100 finance sources. But GMAC is the only lender that can do some of the things we need. They financed 15 to 20 of our pieces of real estate. Many of our import manufacturers weren't interested in helping us with a Chrysler store or a GM store."
Chuck Basil, president of the Basil Ford dealership group in Buffalo, N.Y., said Ford Motor Credit Co. has struggled to obtain more competitive financial terms. "But we're in a good place," he said. "It's slowly turning around. There's no question that Ford Credit has been an advantage to us. There were commercial banks last year that would not touch us. Now they're back knocking on our door."
Mike Maroone, president of AutoNation Inc., the country's largest retail group, said GMAC buys "a couple of thousand" of AutoNation's deals a month, mostly in new vehicles. That is down from several thousand before September 2008, he estimates.
But as the credit markets return to more confidence, Maroone said lenders are still not providing adequate subprime consumer financing.
"Subprime is not back and I'm not sure it's going to come back," he said. "We really miss that subprime financing. It's a big sector of the business that's out there and has not come back. It's one of the reasons why the volumes are where they are today."
You can reach Lindsay Chappell at lchappell@crain.com.
