Long a captive lender with minimal subprime acceptances, DaimlerChrysler AG has acceded to dealer requests in a new program called “Flexible Finance.”
Higher-risk loans will be farmed out by financing division DC Services to two banks that specialize in the nonprime market.
Acting because many dealers turned to non-Chrysler lenders for subprime business, DC Services said the new program would allow subprime loans on Chrysler products to be granted at competitive rates.
At the same time, says Stephen Luyckx, DC Service's senior manager of credit strategies, subprime demand is growing and the new program will keep customers instead of losing them.
Dealers welcome the change. Michael Ahlbrandt, finance & insurance director for Covington Pike Dodge, Memphis, TN, says more competitive rates mean he can close more customers.
Rather than classify nonprime customers as Tiers 3 or 4, DC Services now labels them “S-tier.” That eases some of the stigma, says Ahlbrandt.
DC Services, like Ford Credit and other lenders in the lower-risk market, has lost money because of payment defaults and delinquencies, Luyckx said.
He withheld specific loss figures, but indicates that a long-held conservative policy of Chrysler Credit towards subpar customers is now “a thing of the past” under Flexible Finance.
Likewise at the urging of dealers, Ford Credit has cautiously become more involved in subprime.
DC continues to offer its F&I products and extended service contracts to all customers, including those for non-Chrysler brands handled by Chrysler Group dealers who floorplan with DC.
Chrysler Group is the only domestic auto maker without a subprime subsidiary. Ford Credit has Triad Financial; GMAC, Nuvell Financial.
Flexible Finance does not extend to DaimlerChrysler's premium Mercedes Benz vehicle line.