GM tests 0% financing through Wells Fargo

GM tests 0% financing through Wells Fargo
Jim Henry
Automotive News | August 17, 2011 – 10:28 am EST

General Motors is testing 0 percent financing and other incentives supporting prime-risk new-vehicle auto loans through lending partner Wells Fargo.

The program, which started in May, involves about 50 dealerships, largely on the West Coast, a GM spokeswoman says.

Rick Josie, sales manager at tester store Art Gamblin Motors (Buick-Chevrolet) in Enumclaw, Wash., said last week that the deals include 0 percent financing for up to 60 months on some models.

GM’s Wells Fargo partnership, while small, is part of a bigger phasing out of what was once a monopoly on GM incentives held by the former GMAC, now Ally Financial.

Wells Fargo Dealer Services of Irvine, Calif., the indirect auto lending unit of Wells Fargo & Co. of San Francisco, is perennially the nation’s leading used-car lender. In the first quarter of 2011, it was also the No. 7 new-vehicle lender, Experian Automotive data show.

Don Johnson, vice president of GM’s U.S. sales operations, said last week at the GM Global Business Conference for investors and analysts that diversification is an important part of GM’s overall strategy to improve vehicle financing.

“Our objective here is to offer dealers and consumers a choice in financing. We also want to create a competitive environment,” Johnson said, without referring specifically to Wells Fargo. Besides Ally and Wells Fargo, GM also has a partnership with Minneapolis-based U.S. Bank to provide leases.

In addition, last year GM bought subprime auto loan specialist AmeriCredit Corp. and renamed it GM Financial. GM is building up GM Financial to be a full-service captive, with offerings that include prime and subprime loans, leases, floorplan loans, and F&I products such as extended-service contracts.

GM’s biggest outside auto finance partner remains Ally Financial, the former GMAC. When GM sold a controlling share in GMAC in 2006, the companies reached a 10-year exclusivity agreement for incentives. The agreement was amended as part of the process of GMAC becoming a bank holding company at the end of 2008.

One result is that GM is phasing in incentives via other lenders. There are some strings attached. For instance, in some cases, GM must offer the same incentives to Ally that it offers to other lenders, according to documents filed with the Securities and Exchange Commission. The restrictions will end starting Jan. 1, 2014.

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