Automotive News Canada - July 2017 - 22

* JULY 2017

AUTO FINANCE:
A CHANGED LANDSCAPE

Banks learn to diversify,
tailor their offerings
By HANNAH LUTZ
FINANCE CORRESPONDENT

and head of RBC Automotive
Finance.

DWINDLING PRESENCE

IN EARLY JULY, RBC
When captives' presence in
Automotive Finance partnered
the market dwindled about 10
with Hyundai Auto Canada to
years ago, banks stepped up in
provide subvented financing to
an unprecedented way, partnerits dealerships and to also help
ing with automakers in exclupinpoint Hyundai's opportunity
sive or semi-exclusive relationin the market.
ships.
This is just the latest
RBC has exclusive or
move in banks' diversisemi-exclusive relationfying and customizing
ships with Fiat Chrysler
their business with autoAutomobiles Canada,
makers. As automakHyundai, Maserati
er captive finance comCanada, Tesla and Isuzu.
panies lost share, banks
Scotiabank also suphave taken on new roles,
ports eight undisclosed
such as being exclusive
manufacturer partneror semi-exclusive lenders Simons: You ships representing nine
who are the sole source of must broaden brands. Five are exclusive,
automaker retail incenand the others are semi-exyour focus
tives.
clusive. Whenever the
RBC has doubled its
manufacturer puts an incentive
relationships like these in the
on new cars, dealers send applicalast year.
tions to the exclusive lender. That
With Hyundai, RBC first
lender is the only bank that can
focused on the basics: how to
give the incentive. Then the lendstructure the subvention proer approves or rejects the contract
grams and at what cost.
just as a finance company would.
"But we focused significantThe consumer can still finance
ly on how we could leverage
through another lender, but withour organizational capabilities
out the incentive.
around understanding customFor the semi-exclusive relaer buying patterns, how customtionship, two to three banks
ers transact, when customers
could provide incentivized rates
may be more or less interested
and would compete among themin a particular vehicle or model
selves for business with finanthat Hyundai may be interested
cial support from the automaker.
in selling down the road," said
Simons said RBC thinks
Grant Simons, vice-president
about these partnerships "more

(PHOTO: ISTOCK)

collaboratively as part of providing some of these broader solutions."
For example, RBC has also
played an indirect role with FCA
in the leasing market. By law,
banks in Canada are prohibited
from leasing. Fiat Chrysler was
interested in getting back into the
leasing market without a captive.

'LOOKING FOR A PARTNER'
RBC came up with a plan for
FCA to lease through leasing
and technology company SCI
Marketview with back-end funding by RBC.
"The market is looking for a
partner who has the technological capability, the retail risk
appetite and the ability to transact and service their customers
in a subvented relationship,"
Simons said.
RBC Auto Finance considers its role more broadly than
approving vehicle loans, he said:
"The bespoke part is how do you
structure other benefits and programs that
support the needs of the manufacturer? They are as customized
as you could imagine."
For example, with Maserati,
RBC connects high-net-worth
banking customers with the

Maserati brand and its vehicles.
RBC has profiled Maserati
vehicles at internal events with
top-performing customers across
the country, featured vehicles
at events that aligned with the
RBC's private banking business
and invited some bank customers to a cocktail party at a dealership showcasing Maserati.
"We've done everything from
the very customized, specific
kind of event to a more involved
use of big data and marketing
and analytics insight to draw
a lead program for the OEM,"
Simons said.
RBC has also created teams
to manage one-off creative
requests, Simons said.
"Companies [are] getting outside the way they traditionally
add value to be good facilitators,
brokers and collaborators. That
extends to the auto industry in
some ways more and in some
cases less than other business,"
Simons said. "To be a successful participant, you need to be a
participant in an ecosystem, not
just in doing one thing really
well." - ANC

Brands take different paths after plunge in lease market
By HANNAH LUTZ
FINANCE CORRESPONDENT

LEASING AS A WHOLE TOOK
a dive in Canada for a few years
following 2008, but the plunge
only significantly affected the
captive finance arms of U.S.
brands, experts say.
Chrysler and General Motors
essentially pulled out of leasing, taking captives' overall auto
finance share from 82 percent
in 2008 to 45 per cent in 2012,
according to J.D. Power.
Ford does not publish its loanversus-lease penetration, but it
also "rebalanced marketing support to favour retail sales to a
greater degree," while still making both loans and leases available throughout the financial
crisis, said Paul Monjanel, president of Ford Credit Canada.
"Leasing is a key product so
together we make sure that we
use it in a way that is sustainable
over cycles," he said. "Our present lease mix is consistent with

that of the industry at around 25
beginning in 2005 when it bought
per cent of Ford sales."
shares from GM.
Other captives, such as Toyota
Domestic captives' leasing levand Honda's finance arms, were
els, on the other hand, completeless affected.
ly diminished in some
"Looking back over
cases. For example, GM
that last 10 years we have
abandoned the lease marevolved, but we haven't
ket, entirely.
had significant differences
Cerberus, which
like competitors [have],"
owned half of General
said Darren Cooper,
Motors Acceptance Corp.,
president of Toyota
GM's captive at the time,
Credit Canada. Toyota's
changed GMAC into a
Canadian captive's lease
bank holding company
Cobham:
penetration has been
Leveling out during the financial criabove 50 per cent for a
sis. Because banks are
above 20
long time, he said.
prohibited from leasperc cent.
Leasing brought
ing in Canada, GMAC
Toyota's customers back to the
could no longer originate leasdealership more quickly and
es, said Howie Cobham, senior
increased dealerships' inventory
vice-president of dealer services
of late-model used vehicles.
in Canada for GM Financial/
In 2008, Toyota Credit Canada
AmeriCredit.
even took on a relationship with
"As a result of that, GM was
another automaker. It began
left with a significant gap in its
working with Subaru to support
offering," he said.
both its loans and leases, Cooper
Over the next few years, GM
said. Toyota has acquired a
developed relationships with a
minority equity stake in Subaru,
few banks to ensure that a range

of financing was available to
dealers and customers.
In 2010, GM acquired
AmeriCredit, and renamed it GM
Financial. The following year,
GM Financial acquired leasing
company FinanciaLinx Corp. and
reentered the Canadian leasing
market. Lease penetration rose to
seven per cent by the end of the
year, Cobham said.
"As the years have progressed, we built out our capabilities and we have seen [leasing] level out just north of 20 per
cent over the past few years,"
Cobham said.
GM still has relationships
with a few Canadian banks for
its prime lending business, but
for now, GM Financial only originates leases and nonprime loans
in Canada.
Because of the high leasing
levels, GM dealers have built
up their used-vehicle inventory,
"which was not available to them
with the absence of leasing," he
said. - ANC

Table of Contents for the Digital Edition of Automotive News Canada - July 2017