AutoNation slowly integrates captive CIG Financial

A captive is typically the profit center of an automaker, but not at Fiat Chrysler, where Manley has been CEO for two and a half years.

AutoNation used to have a finance department, but it was in the red when then-CEO Mike Jackson exited in 2001. He considered restarting the captive finance company in 2014, but a year later Jackson dropped the plan, citing cost and return on investment. , scale and competition as reasons for it.

Starting a captive from scratch is very expensive. Other hurdles include staffing needs, obtaining a state lending license, and investor reluctance to buy auto loan bundles until the lender establishes a history.

For these and other reasons, it makes sense for national groups to turn existing lenders into captives.

“The plan is to be very careful and take it slowly as it grows,” Chin said. car news of AutoNation’s plans for captives.

“It will grow with AutoNation USA. They don’t expect [CIG Financial] Important until 2024. “

Captive finance companies, like publicly traded used-car retailer CarMax, could be big drivers of growth, Chin said. The CarMax Auto Finance division provides his 40% of CarMax’s total revenue.

But while captives could further boost used-car sales by offering loans to customers with lower credit ratings, Chin said, they could also pose risks, especially as delinquencies on US auto loans are on the rise. He pointed out that there is a

“Investors don’t want to see that,” Chin said.

Lithia Motors founded Driveway Finance Corp., a captive finance company, in 2011. Chin said Lithia is growing his Driveway rapidly and his CarMax Auto Finance, which has been in operation for nearly 30 years, is expected to generate about $800 million in revenue. this year.

“Consumer credit is very strong,” Chin said. “Losses and delinquencies are unusually low. We are at a point in the cycle where everything is set to normalize.