Wary of regulators, Sonic Automotive Inc. is slowing its plans to establish a captive finance arm.
The Consumer Financial Protection Bureau’s investigations and citations of automakers’ finance arms have given Sonic pause.
In October, Sonic, the nation’s fifth-largest new-vehicle retailer, said that it planned to build a captive finance arm, with the start date four years away.
Now that date may extend even further into the future, if the plan lasts at all.
“We’re being very cautious about it and slowly backed down just a little bit,” Heath Byrd, Sonic CFO, said during an earnings call this week. “One of the things we want to see play out is the CFPB.”
“We want to slow down to ensure we understand the compliance environment,” Byrd told Automotive News.
Sonic had planned to launch its finance arm at its new EchoPark used-vehicle stand-alone stores. The retailer hired Bob Galbo, a former auto finance executive with Ally Financial Services and Bank of America, to develop the finance arm.
Now Galbo is working on lending programs for EchoPark, Byrd said. He is also evaluating the possibility of a private-label financing arrangement for EchoPark, Byrd said. The private-label financing would still be done by lenders, but EchoPark would co-brand with the banks.
“We all know we can make money” by launching a finance arm, Byrd said. But “we don’t want to open ourselves up to compliance” trouble.