TD Auto's growth plan starts with near prime
Clark: "In the near term, our focus is on prime and near prime."
U.S. dealers can expect TD Auto Finance to keep moving down-market into near-prime and subprime loans as it expands, but don't look for it to offer leasing any time soon.
That's the word from Paul Clark, the lender's new CEO. In July, Clark succeeded Chrysler Financial veteran Tom Gilman, who retired at age 60.
In the United States, TD Auto Finance is built on the former Chrysler Financial, which was Chrysler's captive finance company until the automaker's bankruptcy restructuring in 2009. TD Bank Group of Toronto bought Chrysler Financial from Cerberus Capital Management in April 2011.
At the time, Chrysler Financial had about 3,100 U.S. dealers and an auto loan portfolio of just over $3 billion. Under TD Bank those numbers have grown to more than 8,200 dealers and more than $12 billion as of July 31.
Clark, 46, spoke with Automotive News Special Correspondent Jim Henry last week .
TD bank had some very specific goals when it bought Chrysler Financial, such as signing up 5,000 dealers by 2014. You're way ahead of that.
We are exactly where we thought we would be, and in some places we are further ahead than we expected to be.
In May, the bank said it would be doing more near-prime business.
In terms of relevance to the dealers, we want to increase our engagement in the near-prime space. We see the near-prime space as one we're very comfortable with. As a bank, we're obviously very conscious of risk and understanding our markets.
We see that as a tremendous priority in the next six to 12 months. We are a full-spectrum lender in Canada, primarily prime, but we purchased a nonprime company then moved into that space aggressively.
What's next? Moving down-market from prime to near prime to subprime?
As we look at the expansion of our dealer network, there is huge demand for that product, and there is a huge demand for leasing.
But in the near term, our focus is on prime and near prime. Once we're more comfortable with that, then we move on to the next thing.
What about leasing? Banks can't do leasing in Canada, right?
In Canada, we actually are forbidden to provide leasing. We would be in complete learning mode because it's something we don't have today.
From near prime, the next logical extension of that in the short term would be to look at the subprime space, then look for when it's the right time to go to market from a risk perspective and from an operational perspective.
I would put leasing at the far end of spectrum of things we would look at.
Where are you getting your additional U.S. dealers?
It's really nice to see the acceptance beyond the Chrysler franchise in the U.S. If you look at the share today, it's really very well spread out across the U.S.
TD Bank N.A. is predominantly down the Eastern Seaboard, but we view this as a national franchise. Two-thirds of our originations come from areas outside of our footprint in the U.S. where we have branches. That's probably our No. 1 success story.
So you're saying near prime now, subprime relatively soon, and leasing not any time soon.
Our approach to banking is slow, steady growth, as opposed to some that say quick growth and then retreat. We want to make sure dealers know what to expect when they deal with TD Bank.
You can reach Jim Henry at email@example.com.