Fiat Chrysler recently announced it wanted to set up a U.S. finance company that would allow it to create auto loans for consumers. The auto manufacturer said it would either purchase a financial service business or came up with its very own. Fiat Chrysler is the only primary U.S. auto manufacturer that does not have a finance arm.
Fiat Chrysler, in conjunction with Santander Bank, expects the move will improve both sales and earnings.
Autotrader Senior Analyst Michelle Krebs said it wasn’t surprising to see the company’s five-year strategy including a finance arm.
Krebs said Fiat Chrysler would not only boost its profits and revenues but offer more support to dealers with its wholesale financing. It also means car buyers would have more flexibility in their financing.
Ford has a huge advantage over other vehicle manufacturers with its Ford Credit division.
Krebs said in touch economic times, financial institutions are rather standoffish in offering auto financing. She said when business is doing well, they don’t mind offering an auto loan. When they’re not doing so well, they tend to leave vehicle buyers scrambling to find alternatives.
The FCA said U.S. consumers would see more options come available to them with a new captive financial service and support Fiat’s sales and earnings.
FCA CEO Sergio Marchionne said given the company’s financial performance and credit profit, this is the right time for the company to implement the strategy. He said the company has plenty of capital to fund what it needs and should soon have the credit rating needed to make it competitive.
Santander Consumer USA Inc. owns Chrysler Capital that offers consumer financing to the majority of U.S. FCA vehicle purchases
According to FCA, it was looking into the possibility of acquiring Chrysler Capital and talks have begun with Santander.
Why The Company Is Looking At This Possibility Now
Krebs said FCA is looking at the possibility of a finance company because it’s been able to pay its debt down tremendously. She also anticipates its credit rating to be upgraded to investment grade because it’s managed to get rid of so much debt.
She also said the FCA has some good deals with Santander but not happy with the service it’s getting currently. With its own financing arm, it could be more dexterous in the market.
Whether FCA pulls this off or not, the fact remains is that consumers should always shop around for the best car loans to see what financing deals they can get. Look at the bank and credit union before going to a dealership to look at the different interest rates that are being offered to them.
