Wells Fargo extends auto dealer branch network

Wells Fargo has decided to launch more branches which focus specifically on car loans and financing for auto dealers in an effort to increase its auto lending business without taking bad credit risk, according to a report in Reuters.

The bank, which is ranked fourth-largest in the US, currently has 56 specialist branches for car and dealer financing around the country.

Its latest “regional business centre” for car dealerships recently opened in Cherry Hill, New Jersey. Wells Fargo’s approach is markedly different from that of competitors such as Ally Financial which have sought to centralize their auto lending function in order to cut costs.

In contrast, according to an interview given by Dawn Martin Harp, who heads Wells Fargo’s dealer services, the bank is planning to add more such offices, including one in the Southwest by the end of the year, but has no specific number that it is targeting.

The branches are not just sales offices, but are also staffed by include credit officers who approve or deny loans.

Having credit officers who are in the regions where they are lending ensures that they know their customers better, Martin Harp said, noting that “It’s a differentiator for us.”

Wells Fargo’s chief executive John Shrewsberry said on the bank’s first-quarter earnings call in April that auto lending has “gotten to be a more competitive market,” adding, “we’ve picked our spots, I think, a little bit more delicately.”

On the second-quarter call in July, he said the sector is nonetheless “providing a big opportunity because so many cars are being sold.”

Last week, figures from Equifax’s National Consumer Credit Trends Report showed that as of June 2015, the total outstanding balances on auto loans and leases stood at $1.021 trillion, a year-over-year increase of 10.5%.