DealerTrack Inc. believes that in GMAC Financial Services it has landed a key partner in making its credit application software more attractive to dealers. But that new partnership did not come cheap.
DealerTrack has agreed to pay GMAC $15 million in a lump sum when "substantially all" of the General Motors Co. and Chrysler Group dealers in DealerTrack's U.S. network can use DealerTrack's software to send buyer credit applications to GMAC, DealerTrack said in a regulatory filing last month.
DealerTrack, which connects dealers with potential lenders for vehicle loans, has about 800 financial sources in its network. But it lacked GMAC, which is a key lender to car buyers at GM and Chrysler dealers.
"Our strategy has always been to attract new financing sources, expand our subscribing dealer base and add value to our software applications," DealerTrack CEO Mark O'Neil said last month about the GMAC deal.
DealerTrack added about 90 lenders to its network of 17,000 dealers in 2009, but business lagged. With the auto industry in its worst slump last year in more than three decades, DealerTrack felt the effects.
Its transaction services revenue, which covers that generated by credit applications, fell 29 percent to $94.4 million in 2009 from $132.4 million in 2008.
The decrease primarily was the result of a 36 percent decline in the volume of transactions processed through the DealerTrack network -- to 51.4 million for the year, down from 79.7 million in 2008. Additional GMAC volume could help reverse that trend.
GMAC financed 31 percent of GM retail sales in the fourth quarter and 27 percent of Chrysler sales.
DealerTrack, which provides a comprehensive suite of dealer management and selling tools, intends to start rolling out the GMAC option to select GM and Chrysler dealers this spring and to most GM and Chrysler dealers by the end of summer, DealerTrack said in a statement.
Eventually, the plan is to offer GMAC to non-GM and Chrysler dealers as well.