Volvo forms US captive finance arm

Volvo Cars of North America announced the establishment of Volvo Car Financial Services (VCFS), which will begin providing Volvo retailers in all 50 states with a variety of financial services products later this year.


VCFS is the fulfillment of a promise made by Volvo to its US retailers as a key component to the car company's growth strategy in America. Part of that growth strategy has included the introduction of new award-winning models like the XC60 crossover and S60 sports sedan.

"Launching a true captive finance arm is the most important step we will make this year to support our dealer network and customers," said John Maloney, President and CEO of Volvo Cars of North America. "This is a key initiative in our long-term growth plan. We expect to have the commercial loan products available within six months and the consumer loan and lease products available before the end of the year."

VCFS is a wholly owned subsidiary of Volvo Car Corp. and will be based in Rockleigh, N.J. It will employ a team of financial services sales representatives to directly support retailers in providing customers with a luxury financing experience. Products will include retail financing and leasing on both new and pre-owned Volvo vehicles. The programmes offered will represent both financing at standard market rates and promotional offers supported by Volvo Cars of North America.

VCFS will enter into a long-term relationship with Bank of America to provide funding for its financing products, making it the only US automotive luxury captive finance arm with a bank-sourced funding model. VCFS and Bank of America have a framework agreement with final contracts to be executed in the upcoming weeks. In addition, BofA Merrill Lynch will become an exclusive provider for certain VCFS automotive loan and lease securitizations in the United States.

In addition to funding, VCFS will license Bank of America's proprietary underwriting and risk-based pricing technology to support the credit process. VCFS will have its own separate credit policy and credit staff.

"Volvo now will offer a highly competitively priced captive loan and lease product for Volvo customers, and we're glad to back that up with our experience and expertise," said John Hyatt, President, Bank of America Dealer Financial Services. "Our solutions aren't one-size-fits-all at Bank of America. We are thrilled to help Volvo reach this milestone through our customized and flexible funding model."

While VCFS will originate and fund retailers directly on contracted retail and leasing products, the servicing of contracts will be managed by CenterOne Financial Services LLC. CenterOne is a leading servicing provider in the automotive financing industry and has earned a STRONG rating from Standard & Poor's as a consumer finance, automobile loan and lease servicer every year since 2004.

"Rather than re-create our own loan and lease servicing organisation, we decided to leverage CenterOne's world-class servicing platform while maintaining a Volvo-branded customer experience," said Tony Nicolosi, president of Volvo Car Financial Services.

With more than three decades in the automotive industry, CenterOne, a division of World Omni Financial Corp., is one of the nation's largest third-party automobile lease and loan servicing organisations.

"We look forward to this opportunity to lend our experience in captive finance and provide premier third-party servicing to Volvo Car Financial Services," said Brent Sergot, Vice-President and GM, CenterOne. "Our companies share common values - to maintain the highest standards and link great customers with great customer service."

"I call this a 'win-win-win' arrangement," said Nicolosi. "VCFS is a win for Volvo customers because it will be an organisation committed to providing a best-in-class ownership experience; it's a win for our retailers who will be able to offer their customers a complete captive solution for their financing needs; and it's a win for us because it will lead to higher customer satisfaction and increased sales volume."

Along with consumer financing, VCFS, working with Bank of America, will provide Volvo retailers with co-branded commercial financing products such as inventory floor plan, working capital loans and real estate loans.

"Bank of America already is a leading provider of commercial products for Volvo retailers, and with an enhanced captive product offer, we anticipate providing floor plan loans to a majority of our US Volvo dealers," Nicolosi said.

Posted in: Volvo