TD Auto Finance says it will trim its U.S. dealership network, essentially dropping dealerships with the least amount of volume.
TD Auto has more than 9,000 U.S. dealerships signed up, Tim Hockey, head of auto lending for the Toronto-based company, said last week during a conference call with investors. But, he said, “There’s a little bit of an 80-20 rule at play.” That is, 80 percent of the dealerships account for 20 percent of the business and vice versa.
“So as a result, 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 partner up with us,” he said in a conference call last week.
TD Auto Finance is the former Chrysler Financial, Chrysler’s old captive finance company. TD Bank bought Chrysler Financial -- not including its Chrysler Insurance subsidiary -- from New York-based Cerberus Capital Management for about $6.3 billion in cash effective April 2011 and renamed it TD Auto Finance.
At the time the deal was announced in December 2010, the organization had about 2,300 U.S. dealerships, with an eventual target of around 5,000. In fact, the U.S. dealership network passed 5,000 in May 2011. By October 2013, it was up to 9,000.
Spokeswoman Linda Heinrich said this week TD Auto doesn’t have a specific, smaller number of U.S. dealerships in mind.
“The goal isn’t to get down a specific target number of dealers,” she told Automotive News in an e-mail. “We see an opportunity to up our service game, deepen our relationships with our most supportive dealers and build a model for more efficient growth in the future.”
She said dealerships should expect to hear from TD Auto Finance in December and January.
Some dealerships contacted by Automotive News said they were unaware of the lender’s plan to reduce the number of dealer relationships.
“It’s news to me,” said Brian Kelly Jr., vice president of the Boston-area Kelly Auto Group. “We do use them. We have used them since before they became TD. But we certainly use them a lot less. They’re not as competitive as they used to be” when they were a captive finance company, he said.
“So many banks are out there. It all depends on what their latest deal is.”