Monday, November 5, 2007

Chrysler Financial riles non-floorplan dealers

Bradford Wernle
Automotive News
November 5, 2007 - 12:01 am ET

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DETROIT — Chrysler Financial is making it tougher for dealers who do not finance inventories with the captive finance arm.

Under a new policy, non-floorplan dealers who sell vehicles through Chrysler Financial will be reimbursed more slowly for retail and lease contracts than dealers who floorplan with Chrysler Financial. The policy and several related ones took effect Oct. 22.

A dealer who floorplans with Chrysler Financial gets almost instant payment for the vehicle loan or lease, allowing the dealer to pay the floorplan loan. But for a non-floorplan dealership, Chrysler Financial will advance money to cover a loan or lease deal only after paperwork is complete. The delay could be more than a week, dealers say.

Non-floorplan dealers complain the policy will hurt cash flow on retail deals they do with Chrysler Financial, such as 0 percent financing or subvented lease rates.

One dealer, who declined to be named, said the policy would cost him about $6.60 for every day Chrysler Financial held up funding of a $30,000 contract at 8 percent interest. That might seem like a small amount, he said, but it adds up in multiple contracts.

'Premium service'
Mark Manzo, Chrysler Financial's vice president of sales and marketing, said Chrysler Financial is merely offering a premium service to dealers who floorplan through the captive.

"That premium service has to be paid for," Manzo said.

Other automakers offer loyalty programs to floorplan customers. For instance, dealers who finance inventories through Toyota Financial Services get a discount rate. They also get discounts on vehicle financing on lease contracts, said Toyota Financial Services spokeswoman Kerry Rivera.

Ford Motor Credit Co. offers loyalty incentives, including deals on loans and leases, as well as credits against floorplan expenses, says spokeswoman Meredith Libbey.

GMAC Financial Services spokesman Mike Stoller says General Motors floorplan dealers are eligible for programs that reward retail penetration. Benefits include discounts on dealer training and auctions, equipment loans and reward programs, he said.

"Think of it like an airline reward program," Stoller said.

Chuck Eddy, owner of Bob and Chuck Eddy Chrysler-Jeep-Dodge in Austintown, Ohio, and Chrysler's NADA representative, said the policy change puts Chrysler Financial in line with banks. Dealers who use independent finance sources must wait for their money, too, he said.

"It goes back to the old thing — membership has its privileges."

Even dealers who do not use Chrysler Financial for loans must work through the captive to use its special programs like 0 percent financing or subsidized lease rates.

Extra interest
The policy means dealers who don't floorplan with Chrysler Financial still could be paying interest on vehicles for several days after customers have driven them off the lot.

Doug Alley, a Dodge dealer in Kingsport, Tenn., who does not floorplan with Chrysler Financial, said the new policy is not a big problem for him, but it could hurt some dealers' cash flow.

"If you've got a $30,000 contract you're not funding on for three to four days, you've got that $30,000 out there you might otherwise have put to work, either buying a used car or investing it somewhere," Alley said.

An executive from a dealership group that doesn't floorplan with Chrysler Financial said the policy is unfair.

"They're trying to coerce dealers to floor with them and make it uncompetitive for those who don't," the executive said.

Greg Rairdon, a Seattle-area dealer who owns four Chrysler stores, says he feels that the decisiveness and energy of Chrysler LLC's new management has not filtered over to the finance arm. Chrysler Financial, like Chrysler LLC, is owned by Cerberus Capital Management but is operated independently.

"Forty three percent of the Chrysler dealers do not floorplan with Chrysler Financial," Rairdon said. Chrysler Financial is "going to have to partner with those 43 percent if they're going to be successful."

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