Hyundai Capital America is partnering with vehicle subscription company Flexdrive, the companies said last week, to develop financing models intended to reduce the costs of vehicle subscription plans for dealerships and customers.
Andrew Leone, vice president of commercial credit risk at Hyundai Capital, said the primary goal of the partnership is to understand what Hyundai Capital customers and Hyundai dealers need regarding subscription services.
“We’re not trying to replace lease or replace financing, but there’s some other segments of the market where a lease is not the answer, or a 72-month or 82-month [loan] is not the answer,” Leone said. “There’s customers where that lease or that extended warranty package is not the solution. This is about creating products and solutions for customers and dealers to meet their needs.”
Flexdrive, of suburban Atlanta, approached Hyundai's captive financing arm last year, Flexdrive CEO Jose Puente said. The two companies share a similar marketplace perspective, Puente said, adding that Hyundai Capital America's position as a captive lender gives it added incentive to reduce subscription plan costs.
"I like the fact that they're ... a captive, and they're the ones getting all these cars in off lease, so they're the ones holding the residuals," Puente said. "They hold the balance sheet on the cars, and they also hold the capital."
This is the first lender partnership for Flexdrive, which is co-owned by Cox Automotive and Holman Enterprises.
In addition to refining the logistics and technology involved in developing a retail subscription program, the companies are focused on making sure that offering alternative ownership models makes economic sense for dealers, Puente said. Together, the companies developed a subscription floorplan financing tool.
Several dealerships are testing the tool, Puente said, which he referred to as a "usage-based" floorplanning.
Traditional floorplanning models restrict what a dealership can do with its inventory, Puente said. Typically, the loans start accruing interest after 60 days.
"The structure of this program removes those barriers," Puente said. "It does allow you to put the car on subscription; it does allow you to have extended terms so that you don't get financially punished for having the car in the program for a longer period of time."
Puente would not disclose how many dealerships were piloting the tool or their locations.