Sovereign Bancorp Curbs Car Loans

Sovereign Bancorp has stunned reeling local auto dealers by pulling out of the indirect auto-loan business at a time when car sales are suffering across the nation.

“It’s devastating,” said Ray Ciccolo, president of Village Automotive Group, which operates Honda Village in Newton, Boston Volvo, Charles River Saab and other dealerships in Massachusetts.

“It’s pretty unsettling news,” said Ciccolo, director of the Massachusetts Auto Dealers Association. Auto dealers were notified late last week that Sovereign - which in years past has been a major player in the Massachusetts auto-loan market - would no longer finance “indirect” deals arranged in showrooms by auto dealers.Sovereign will continue, however, to make direct auto loans to its bank-branch customers.

Earlier this year, Sovereign, which has seen its stock pummeled over the past year, pulled out of the car-loan business in southeastern and southwestern states, after a disastrous expansion that got hammered by the economic downturn.

Sovereign, which is being purchased by Spain’s Banco Santander, originated $41 million in indirect loans, for 2,050 vehicles, in January in Massachusetts - but its business was down to $14 million, for 749 vehicles, in September, said spokesman Andrew Gully.

Bank industry officials say Sovereign has traditionally been among the top-five auto lenders in Massachusetts - and the demise of its indirect business on Nov. 20 is a major market development.

Ciccollo said Sovereign’s move has sent dealers “scrambling” to line up auto financing from other sources.

Source:
http://www.bostonherald.com/