Q&A: PAUL CLARK

TD Auto Finance chief: We want to be a one-stop finance shop

Clark: "The dealers have been very understanding and receptive to what we're trying to do. We're having discussions that say, 'If we're going to build this relationship, what do you need from us?'"
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TD Auto Finance said in December it would trim its network of U.S. dealerships this year from the 9,000 it had at the time.

That's nearly four times the 2,300 stores it had when TD Bank Group of Toronto bought the company, then Chrysler Financial, from Cerberus Capital Management in April 2011. Under TD Bank's ownership, TD Auto Finance's outstanding balance of U.S indirect auto loans, the kind originated at dealerships, grew from around $3 billion to nearly $16 billion as of the fourth quarter of 2013.

TD Bank, like Chase and other banks, wants to focus on strengthening relationships with the dealerships that send the most business, including cross-selling them along multiple business lines, TD Auto Finance CEO Paul Clark says. The company has not said how many low-volume dealerships it plans to cut.

Clark discussed TD Auto Finance's business strategy with Special Correspondent Jim Henry last month on the sidelines of the National Automobile Dealers Association convention in New Orleans.

Q: Auto lenders have been talking about how good the lending business is, but you're pulling back in terms of the number of dealerships. Does that say something about the market?

A: Our portfolio experience, if anything, has been improving. Our strength is at its strongest point. It is not about dealer performance or loss performance. It's more that the rate of recovery, the build-out, has slowed. The market is very rate-squeezed for the last 18 months. There's a recognition that we already weren't signing up as many relationships as we were.

If the market were going gangbusters we would still be doing business as we were. But if it's going to be about service, you can't do that if you're still in sign-up, sign-up, sign-up mode.

How are dealers reacting?

The dealers have been very understanding and receptive to what we're trying to do. We're having discussions that say, "If we're going to build this relationship, what do you need from us?"

We've also received some good, candid feedback where we haven't been strong. Equally as much, for dealers where we already had a strong relationship, we have had a pickup in business.

In some instances with the products we offer we're not going to be a dealer's first choice. We'll be maintaining contact with them and some point in the future maybe we'll be able to get back with them.

What's the next step with dealers?

We're taking several fronts. The one that excites us the most is leveraging "TD Bank, America's Most Convenient Bank." For this particular bank, service is our differentiator. For dealers that means retail floorplan, commercial banking and more, across the whole footprint. The payoff is in terms of feeling like you can be a one-stop shop. That's a tremendous advantage. In terms of rate the environment is incredibly competitive. We are not going to win competing just on rate.

What are some practical changes?

The second thing we're doing is to rebuild our credit scorecard. We started this in the fall and it is ongoing. This gives us the ability to buy deeper, in a manner that's fast and efficient. It's really important that every dealership knows exactly what we will buy.

In the short term that also means increasing our auto-responses instead of manual, so applications can be approved in a few seconds instead of two or three minutes. The more you can do that, the quicker and the more consistent you can buy.

Third, we are bringing to market businesses with that extraordinary service I talked about earlier, services we don't have today.

What products do you lack?

There are some retail offerings. For instance, we are exploring subprime. There are some commercial banking, cash-management functions that make it easier to do business for dealers. Also, there's how to bring the bank to the employees of the dealership.

You can reach Jim Henry at autonews@crain.com.

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