Chrysler near a deal for preferred lender
Photo credit: BLOOMBERG
DETROIT -- Chrysler Group is close to signing a new preferred auto lender that promises to boost leasing for dealers.
Chrysler-Fiat CEO Sergio Marchionne said the automaker is "in the final stretch" of negotiations with the financial services provider, which he did not name. The Wall Street Journal, citing unnamed sources, reported that the lender is Spain's Banco Santander.
The lender will replace Ally Financial Inc. as the primary lender to dealers and customers.
Marchionne said at the Detroit auto show last week that the agreement would allow Chrysler dealers to increase shoppers' leasing options, which in turn can boost vehicle sales by qualifying more consumers for financing.
"We understand that there's a piece of the market that we're not currently accessing," Marchionne said. "Whether we do it directly or 100 percent through a provider or in a combination with other sources, it really doesn't matter. But we'll be there."
Reid Bigland, head of U.S. sales, said Chrysler has some leasing programs in place but they account for only 10 to 13 percent of U.S. sales while the industry average is about 20 percent. "I think in any arrangement that we put forward, it will have a leasing element," he said. "How much leasing is just going to kind of depend on the dealers and the market."
The arrangement would only cover sales in the United States, not in Canada.
Under previous owner Cerberus Capital Management, Chrysler abruptly ended leasing in July 2008 when financing through Chrysler Financial, Chrysler's former captive finance arm, evaporated. Without leasing options, sales of Chrysler vehicles fell sharply.
Since taking over Chrysler, Marchionne has said repeatedly that the company doesn't need a captive finance arm to boost sales, despite dealer desires for an in-house lender. Marchionne said Chrysler should concentrate on making profitable vehicles instead of trying to make profits from auto financing.
But in comments to Automotive News last week, Marchionne said the new preferred lender will operate in much the same way as other automakers' in-house lenders, and might even have Chrysler in its name.
"It will look and smell like a captive arm," he said. "This sounds like a European solution, but if I can use your balance sheet and my name, I think we're going to be fine."
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