If dealers think the Internet is a threat to their new- and used-car business, think about freely accessible on-line auto financing.

Just about every on-line referral service is partnering with a bank.

Autobytel, CarSmart and AutoConnect are aligned with the CarFinance.com division of Nation's Bank. Cars.com makes Creditland financing available to its viewers. Even AutoNation has a web site called Giggo.com that offers Debis Financial Services Inc. products.

Other on-line buying services offer not only extended warranty coverage, but auto insurance, creating a convenient one-stop shopping experience for Internet surfers.

It's not difficult to see where these services are looking to increase the profitability of their ventures. Dealers have been using F&I as profit centers for years, especially as margins on new cars narrow.

"I believe that's the major threat that the Internet is going to pose," says Michael L. Lazarus, executive vice president of the Long Island Automotive Group. "The Internet will pick and choose the cherry people, leaving the dealers with the subprime."

Other dealers are as concerned about the F&I problems posed by consumers finding independent financing on line. Asked if he felt threatened by on-line F&I, Harold Kuhn, owner of Park Motor Sales in Detroit, says, "Yes. I'm having a hard time getting my arms around the Internet."

Even if dealers still get their share of F&I customers, the competition will force them to offer lower rates, which will translate into lower profits.

"This is just one more element that will force dealers to be aggressive with rate margins," says Louis Carrio, director of educational services for GMAC. "This is a world where information is powerful and it's cheap."

Captive lenders, like GMAC, also are "concerned" about the ramifications of customers having easy access to independent loans and leases.

"It is a concern," says Steve Luyckx, manager of financial technologies at DaimlerChrysler Financial Services. "We'd be naive if we said it wasn't. You can't deliver a car through a T1 line, but you can deliver a loan." "Competition is always a concern," says Ken Robertson, Ford Credit's Internet communications manager. "But our main concern is the customer and if we find out that customers want a particular service, we want to be the first to provide that service."

Mr. Luyckx says his company is beginning to take a more active role on the Internet, mostly offering customers pre-qualification on its and the Dodge, Chrysler-Plymouth and Jeep division web sites.

"We want to make sure that these other buying services aren't the only option," he says, reminding that banks will have a difficult time matching the low rates and other incentives available through captive finance companies.

"So much of our financing is incentive based, that we look pretty good if the dealer gets a chance to present it," Mr. Carrio agrees.

How deeply Daimler Chrysler Financial will involve itself in on-line financing will depend not only on how the Internet medium develops, but how the relationship between dealers and captive lenders evolve.

"We're watching the market," says Mr. Luyckx.

He adds, "Because we're not a direct lender, all of our processes involve the dealer. In order to become a direct lender we'd have to be licensed as such in all 50 states and that isn't likely to happen."

In addition to lower rates and convenience, another way captive lenders can compete with independents in cyberspace is with on-line credit approval.

DaimlerChrysler Financial is pursuing a real-time credit approval process, which will be part of the "Get a (price) Quote" feature on Daimler Chrysler's corporate web site. This is expected to appear in the next month or two.

Like the other captive lenders, Ford Credit isn't a direct lender, but Ford Credit, says Mr. Robertson, offers on-line credit approval and other services that are convenient for both customers and dealers.

Ford Credit's web site has a feature called Auto Apply where customers select a vehicle, select a dealership and apply for credit on line.

"They may get approval while they're still on line," says Mr. Robertson. "The dealer is notified and as long as they don't change their minds about what vehicle they want, they're good to go right there."

Other services Ford Credit offers via the Internet include on-line monitoring and updating of account activity and information.

Although Ford Credit has been offering customers automatic electronic funds transfers for payments, in the fourth quarter of the year customers will be offered electronic bill presentation and payment. That means customers would get an e-mail that says the bill is due on a particular day. The customer will return the e-mail with the day they want the funds transferred.

"This gives customer control over when the money goes," says Mr. Robertson.

With the increasing threat of Internet buying services and independent banks "sniping off" their business, as New York dealer Mr. Lazarus says, dealers need to be more conscious of the way they treat Internet customers, say the captive lenders.

"(Dealers) still have not addressed the need for a dedicated Internet sales person," says Pam Barker, GMAC's manager of F&I sales training. "There's no denying that the Internet customer is more informed and more involved in the investigation of they vehicle the want to buy."

Ms. Barker believes these customers get less-than-preferential treatment from dealership sales forces because often they are armed with the invoice price and sales people assume (perhaps wrongly) that they won't be able to sell them F&I products.

"A year or six months ago I would have agreed with that," replies Daimler Chrysler Financial's Mr. Luyckx. "I sense a change in that kind of attitude in the last six months. (Dealers) are realizing that the Internet shopper has to be treated differently or they could be turned off."