Most Car Companies Want Their Own Finance Company So They Have A Place To Go Home To

That’s partly why car companies own their own finance companies.

Ford does. So do Toyota, Honda, Nissan, Hyundai, Volkswagen, BMW and Mercedes-Benz. Chrysler doesn’t. GM is building one out of GM Financial, a subprime auto lender GM acquired in 2010.

True, Chrysler and GM also share a “preferred lender” setup with Ally Financial Services, the former GMAC.

But Ford is the only domestic manufacturer with an up-and-running, full-service, continuously operating, “captive” finance company.

Ford Credit made $393 million in pre-tax earnings in the third quarter, the company said on Oct. 30. That was down from $581 a year earlier. However, that was largely because of the absence of a couple of unusual factors that provided a boost last year.

Ford Credit’s long-term value is that its first mission in life is to help sell Ford and Lincoln cars and trucks, period.

The car companies always want a lender of last resort who will finance loans and leases, and help the car company move the metal. The captive finance company is where, “they have to take you in.”

The importance of having a captive finance company was painfully driven home in the last recession. The former Chrysler Financial quit leasing cold turkey, and the Obama Administration froze Chrysler Financial out of Chrysler’s bankruptcy restructuring. GMAC, which was spun off earlier from GM, also cut way back on new loans and leases. It emerged alongside GM’s bankruptcy restructuring as Ally, a bank.

Certainly there are arguments for both sides. Banks like Ally and like TD Bank, the parent company of TD Auto Finance, the former Chrysler Financial, can use deposit accounts to originate auto loans and leases. That’s just about the cheapest source of funds around.

Nevertheless, there’s no place like home.