Motor Credit Co.’s decision to end its relationship with North American Operations should help sales, say dealers.
Credit informed its dealers it will stop financing Mazda buyers on Oct. 1. It will, however, continue servicing customers who currently have leases or loans with Ford Credit.
Additionally, Ford Credit will stop providing floorplan financing to Mazda dealers except for dealers selling both Mazda and Ford vehicles.
Chase Auto Finance, the nation’s No. 3 auto lender, will replace Ford Credit as Mazda’s financing arm, says Jeremy Barnes, Mazda’s director-product and corporate communications.
In September Chase stopped writing new leases except for customers buying Subaru and Saturn vehicles due to contracts it has with those brands, but will provide leasing to Mazda buyers, Barnes says.
“It’s a very positive move and I think it will affect sales in a positive way,” says Jeff Sikes, owner of Jeff Sikes Mazda in Huntsville, AL, and Mazda Trussville in Birmingham.
“Over the last six months, because of the difficulties that Ford has had with their finances, they haven’t been as competitive on pricing as we’d like for them to have been,” he says. “Through the leases we’ve had to subsidize interest rates more than we should have, not us as the dealer but as the manufacturer.
“We’ve had to put too much subsidy money in to get competitive rates for our lease payments and our finance payments.”
Sikes says leasing makes up about 20%-25% of Mazda’s total business.
In 2007, his Huntsville store sold approximately 360 vehicles, while the Birmingham store made about 600 new-car deliveries.
“This is unfortunate because our partnership and relationship (with Ford Credit) has been so good, except for pricing. Everybody is very optimistic about the Chase relationship that’s coming on board,” says Sikes, who’s also the chairman of Mazda’s National Dealer Council.
Sikes says many Mazda dealers he represents have worked with Chase Auto Finance for several years and “have nothing but great things to say about them.
“We have done a little bit of business with Chase in the past. They haven’t been as big in the South as they have in the Northeast,” he says. “We’ll have financing and leasing through this relationship. We’ll move forward with better rates and better lease rates then we ever have in the past.
“If you couple good service with competitive rates, it’s nothing but a positive for us.”
The move is somewhat surprising because Ford Motor Co. owns a 33.3% stake in Mazda but the decision reflects the challenges in the credit market.
Ford says its credit arm took a $2.1 billion charge in the second quarter related to residual values on its lease portfolio.
Meanwhile, Ford lost nearly $9 billion in second-quarter 2008.
LLC said earlier this year that its financial arm was abandoning leasing in the U.S. on Aug. 1. And GMAC Financial Services at the end of July announced it would no longer offer incentivized leasing in Canada.
Ford Motor Credit points to a tough business environment and tighter credit markets that are challenging the entire industry as the reason for the divorce with Mazda.
“For us, it means that we’ll focus on supporting the other Ford brands,” says Brenda Hines, spokeswoman for Ford Credit.
That includes the Ford, Lincoln, Mercury and Volvo brands, along with Jaguar and Land Rover. Ford sold Jaguar and Land Rover in June toMotors Ltd., yet will continue to provide financing services for those brands through 2009.
Hines says Ford Credit will “continue to provide some financing for (Mazda) dealers and customers through the end of the year.”