Chase halts car loans to 11% of its stores

Bruce Jackson: Culling the herd
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Chase Auto Finance is cutting car-loan availability to about 1,800 dealerships so it can focus on its higher-volume stores.

TD Auto Finance has hinted that it also will stop doing business with some of its dealerships.

Chase's nearly 11 percent cut in store count brings its total to about 14,000, the company said.

Since the recession, Chase's auto loan portfolio has undergone huge growth as U.S. light-vehicle sales have increased, said Bruce Jackson, head of retail lending for Chase Auto Finance. The financial-services giant underwrote auto loans totaling $26 billion in 2013, up 12 percent from $23.3 billion in 2012.

But auto loan growth at Chase is expected to fall to about 4 percent in 2014, about the projected rate of increase for industrywide auto sales this year, Jackson said.

Consequently, Chase wants to be more responsive to dealerships that bring the lion's share of the company's business, he said. The 1,800 dealerships being culled brought less than 5 percent of Chase's annual car loan volume, Jackson said.

Chase, he said, is aligning with dealers "to get them what they need."

Chase has sent letters to dealerships over the past several weeks informing them that the lender no longer would write loans for their car buyers. The final letters in the round of cutbacks are expected this week, the company said.

Jackson said Chase will add other dealerships that want to offer its loans to customers.

Chase is far from the only auto lender looking to reduce the number of dealerships it services.

In a conference call in December, TD Auto Finance Group head Tim Hockey said the lender could serve its more than 9,000 dealerships better if there were fewer to see. Hockey invoked the 80-20 rule, implying that a minority of stores generate a majority of the bank's business.

TD Auto Finance is the former Chrysler Financial, which was bought by TD Bank Group of Toronto and renamed in 2011. Since then, TD Auto Finance has grown rapidly.

"We expect that going forward we'll have an actual smaller number of dealers as we concentrate our efforts from a servicing point of view on those dealers that really want to partner up with us," Hockey said.

CEO Paul Clark says TD Auto Finance has started meeting with dealers to have that talk: "We're having discussions that say, 'If we're going to build this relationship, what do you need from us?'"

With fewer dealers to see, Chase sales representatives can visit dealerships more often to learn about what they need, Jackson said, not only in auto loans but other financial services that Chase provides, such as floorplanning, credit cards and checking accounts.

Ultimately, Chase wants to provide auto loan approvals as quickly as possible when a dealership asks without diminishing its underwriting standards, a Chase spokeswoman said.

Chris Murray, general manager of Team Chevrolet Inc. in Olean, N.Y., southeast of Buffalo, said Chase discontinued his access to customer auto loans in mid-December.

He said Chase had financed just two of his store's loans in the past six months.

A local bank and credit union repeatedly beat Chase's rates, he said.

Team Chevrolet sells about 40 new vehicles a month, he said. Of those, 80 percent are financed.

Murray said when the store asked Chase to finance a car, the lender increasingly asked for proof of income and other documentation for buyers with credit scores of more than 800.

He said he wouldn't insult his customers for that information so he didn't bring the Chase rates to them.

He said: "These were customers not used to being asked those questions."

Jim Henry contributed to this report.

You can reach David Barkholz at dbarkholz@crain.com. -- Follow David on Twitter and

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