Chrysler seeking new in-house financing arrangement

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Artist's rendition of the Chrysler logo.

Chrysler wants an in-house, “captive-finance” arm. (Photo Credit: Public Domain/ANGELUS/Wikipedia)

Chrysler is looking to develop an in-house financing arm, reports Reuters. Chrysler Group LLC is currently in negotiations with various banks to create a financing joint venture that would serve to increase sales momentum. Sources indicate that a partnership would resemble the working relationship between Chrysler majority owner Fiat SpA and Credit Agricole SA.

Chrysler looks to strike deal by mid-2012

Chrysler Group LLC currently has a preferred-lender arrangement with Ally Financial Inc., but the partnership is set to expire by mid-2013. Unnamed sources within Chrysler noted to the automotive press that the company would like to have a new partnership in place one year before the current Ally Financial contract ends.

Ally provides Chrysler customers with subvented (subsidized) loans at below-market rates. The automaker pays the lender to bridge the gap. The Wall Street Journal notes that Ally Financial and JPMorgan Chase & Co. are believed to be involved in negotiations with Chrysler. Currently, Chrysler is the only Big Three Detroit automaker without its own dedicated, in-house financing arm. General Motors purchased AmeriCredit Corp. for $3.5 billion just before preparing for an initial public offering in 2010, a move that mollified investors and GM dealers who were complaining that a lack of financing options were hurting sales figures.

Desperately seeking a captive lender

Fiat, which owns 58.5 percent of Chrysler Group LLC, has had a solid agreement in place with Credit Agricole since 2006, notes Automotive News. The Paris-based bank provides funding, while Fiat SpA is responsible for dealer relations.

With a “captive-finance” business in tow, Chrysler would be able to set its own credit policies, which in turn would make it easier for Chrysler dealers to obtain funding for vehicle inventory purchase. Most significantly, Chrysler would be able to provide the best possible auto financing rates for consumers.

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Lending boosts automotive sales

Two straight years of more than 10 percent growth in U.S. light-vehicle sales have not coincidentally transpired as banks have boosted automotive lending. Autodata Corp. notes that this is the first time that the U.S. market has seen such a prolonged period of increased sales since 1984. Car and truck sales through January were at their highest level since “Cash for Clunkers” in August 2009.

Chrysler on the mend

Chrysler Group LLC CEO Sergio Marchionne has helped steer the automaker back to health after the 2009 bankruptcy and government-backed restructuring. Last year marked Chrysler’s first profitable year since the bankruptcy, with a net income of $183 million. U.S. sales in 2011 were up 26 percent over the previous year to 1.37 million. January 2012 sales, buoyed by the Ram pickup and 200 sedan, were up 44 percent over the same time in 2011.

Chrysler is seeking lenders


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