In the Chrysler relationship, Santander is willing to lend more per car than in the typical subprime deal, waive its typical fee or make other contributions in return for a greater volume of business, Fitzgerald said.
The program dovetails with Chrysler’s desire to sell more small vehicles and to capture more young buyers.
Special Correspondent Jim Henry spoke recently with Fitzgerald at company headquarters in Dallas.
Does Chrysler pay for all program incentives or do you share the costs?
For us, we’re willing to do things we wouldn’t do for somebody else. For instance, we had a rate sale in March where we reduced rates 200 basis points, or 2 percent. We wanted it to be a significant enough reduction to attract some business. It’s something we wanted to do. Of course the idea is if we get enough business, and it’s only for one week, the net result for us will be equal.
You’re thought of as a subprime specialist, but what’s your prior experience with near-prime?
We tried to create a near-prime program under the Drive program. But we weren’t getting those near-prime, nonprime applications. Drive could never break out of that deep subprime.
What does that mean? It sounds like you were trying to get near-prime customers, but the applications you actually got were for subprime.
We want to put people in cars they can afford based on their payment-to-income ratio, their debt-to-income. When you get in the deep subprime, customers just can’t afford a new car. The Drive program [that is, the part that was aimed at near-prime customers, had] an average payment of $350 per month in 2006 and 2007. We learned our lesson. Once people’s payments get above a certain threshold, they just can’t do it.
So the Chrysler program is about selling new cars? What kind of volume are you doing?
Yes, it’s new. We’ve been doing probably around 1,000 units per month, although recently we made some changes that have really boosted volume. It’s also the busy season, which is tied to tax returns.
What’s Santander Auto Finance? That’s a near-prime brand, too?
Santander Auto Finance has been since July 2009. It really didn’t become national until the first quarter of 2010. It’s a competitor for banks like Capital One, Wells Fargo, and Chase Auto Finance. It puts us in a different light. The dealers realize it’s a very competitive program.
A new brand name can be useful, but getting F&I managers conditioned to send the right credit application to the right lender is a real accomplishment.
When we were a one-trick pony -- high fees and high rates -- there’s baggage that goes with that ... there’s good and there’s bad. There are so many things we have going for us now. We’ve seen other lenders who were forced to exit, but we were there through the thick of it.