Does a car company need to own a captive finance company?
While General Motors and Chrysler Group came off similar experiences of being partners with Ally Financial after their old captives went away during restructuring, they have reached different conclusions.
GM is a “yes” for owning its own captive. GM bought subprime lender AmeriCredit in 2010 and turned it into GM Financial, adding prime-risk loans and leasing, plus commercial loans for dealers.
GM’s current deal to route some but not all of its incentives through Ally expires at year end. In beefing up GM Financial, GM has stressed GM Financial’s role as a lender of last resort for GM dealers and a dependable source for leases. GM and Ally also say they plan to continue to work together.
Meanwhile, the Ford, Toyota, Honda, Nissan, Volkswagen and the Hyundai and Kia brands have all stuck with their wholly owned captive finance companies.
Chrysler is a “no” for outright owning a finance company. Chrysler launches Chrysler Capital today, a joint venture with Spain’s Banco Santander. The bank insists that Chrysler Capital will act “100 percent” like a captive finance company even though it’s a bank operation.
Chrysler served notice a year ago it would let its current partnership with Ally expire on April 30. Presumably, Chrysler could have reverted to a traditional captive like the old Chrysler Financial, but Chrysler signed up with another bank instead.
That has well worked for some importers.
For example, the Mazda, Subaru, Jaguar and Land Rover brands use Chase Auto Finance to provide captive-style services.
What’s the acid test for the optimum captive finance relationship? Another recession. Hopefully, that’s a long way off.