The offers look the same at the retail level whether they're from Ally or from Chase -- say, 0 percent loans for up to 72 months on some 2011 models, for example. What customers and dealerships get out of the arrangement is another potential source of financing.
What's less obvious is what Chrysler gets out of it. Sure, all manufacturers want to have diverse sources of retail funding. But Sheinbaum says the potential benefits for the manufacturer could go beyond that.
All auto lenders compete on rates. Lenders have different borrowing costs, different appetites for risk, different relationships with dealers, and different response times for credit applications. All those factors weigh in the perceived value to the manufacturer of a lender.
In other words, the wholesale price for the manufacturer, so to speak, may be different even though the retail price is the same, he says.
Sheinbaum spoke by phone recently with Special Correspondent Jim Henry.
The offers you have for Chrysler and Fiat that are supported by incentives are the same as the offers Ally has. How does that work?
We put the offer out there, the same as what Ally is doing -- 0 percent or whatever the rate is. The dealer has the option to send the deal to Ally or send it to Chase.
Why would the manufacturer bother to do that?
For diversification of financing sources. For instance, you've seen GM do that. [GM acquired AmeriCredit, for example.] It also gives the OEM a chance to have a lower-cost option.
So only the customer-facing deal is the same? Each lender makes its own deal with the manufacturer.
We feel pretty good about the cost to Chrysler to offer that deal. What that gives us is we've got a shot [at those customer contracts]. The dealers may or may not send them to us, we'll see. The point is we've got a shot.
What happens when your automaker partner isn't offering any deals?
We do expect that as part of building a relationship with Chrysler and with Fiat, that we will get more business from those brands, even when subvention is not running. Our experience with other brands is that once you've done business with dealers, the dealers tend to be more supportive in the future. We have seen some early signs that this is the case.
What about the different risk tiers? Are you doing prime-only for Chrysler Group? Subprime? How about the full spectrum?
It's broader than prime, but it's not full spectrum. We don't have any subprime subvention from OEMs.
How much subprime do you do?
We do -- and we have always done -- nonsubvented, new and used, for Chrysler Group dealers. And as you know we have a big subprime/near-prime operation for all dealers around the country. It's a very strong, growing business. It performed well during the last cycle. We've got 45 custom [that is, subprime and nonprime] offices. We added three offices in the past year. We're adding another three next year. We're adding underwriters. We're adding salespeople.
What about leasing? Leasing is not part of the deal with Chrysler Group. Does that mean you could add leasing later?
Leasing is not part of that deal, strictly. Leasing wasn't part of the agenda.
You recently renewed your private-label relationship with Subaru of America. Has anything changed because Subaru has grown so much?
We've been working with them for over 10 years. We have a great relationship with the company. They have had a big growth plan. This [Chase relationship] allows them to focus their attention on building and distributing great cars, which they are doing. It's a great relationship. We just wanted to make sure it's a long-term relationship; we decided to lock each other in.
How about your relationships with other automotive brands?
Jaguar is doing very well. Mazda continues to be very strong.
Are you big in e-contracting?
We haven't seen a big uplift on that. We're prepared to take as much of that [electronic documents] as the dealers send us.
How about mobile technologies?
As a company, we've spent a lot of efforts on servicing. Using an iPad or various kinds of e-pads, you can use our Web site, Chase.com, to check your balance, make a payment. We've tried to make those things easier that customers actually want to do online. I don't really think we need to go to acquiring new accounts on iPads, the dealers can go to DealerTrack or RouteOne, any number of places to do that.
A lot of banks have apps that allow customers to handle all their accounts using their smartphones, including their auto loan or lease. Is that what you mean?
Absolutely. We are benefiting from the scale of investment across the bank. It's a big investment. I'm not sure it's something we could justify if it was just for automotive.