SC is the holding company for Santander Consumer USA Inc., an Illinois corporation,
and subsidiaries, a specialized consumer finance company focused on vehicle
finance and third-party servicing. The Company’s primary business is the
indirect origination of retail installment contracts, principally through manufacturer-franchised
dealers in connection with their sale of new and used vehicles to retail consumers.
In conjunction with the Chrysler Agreement, a ten-year private-label financing
agreement with FCA that became effective May 1, 2013, the Company offers a full
spectrum of auto financing products and services to FCA customers and dealers
under the Chrysler Capital brand. These products and services include consumer
retail installment contracts and leases, as well as dealer loans for inventory,
construction, real estate, working capital and revolving lines of credit.
The Company also originates vehicle loans through a Web-based direct lending
program, purchases vehicle retail installment contracts from other lenders,
and services automobile and recreational and marine vehicle portfolios for other
lenders. Additionally, the Company has other relationships through which it
holds personal loans, private-label credit cards and other consumer finance
products.
Our primary goal is to create stockholder value by leveraging our systems,
data, liquidity, and management. Our business strategy is to increase market
penetration in the vehicle finance industry while deploying our capital and
liquidity efficiently.
Organic Growth in Indirect Auto Finance. We have extensive data on and experience
with consumer behavior across the full credit spectrum and are a key player
in the U.S. vehicle finance market. We have the ability to continue to increase
our market penetration in the vehicle finance sector, subject to attractive
market conditions, via the number and depth of our relationships. We plan to
achieve this in part through alliance programs with national vehicle dealer
groups and financial institutions, including banks, credit unions, and other
lenders, in both the prime and nonprime vehicle finance markets. Our technology-based
platform enables us to integrate seamlessly with other originators and thereby
benefit from their channels and brands.
Strategic Alliances with OEMs. We plan to expand our existing OEM relationships
to drive incremental origination volume, primarily through Chrysler Capital.
The loans and leases originated through Chrysler Capital should provide us with
the majority of our near-term expected growth. In addition, the experience gained
in lease and dealer financing can be applied to improve origination volume through
the rest of our dealer base. Our relationship with FCA has accelerated our transformation
into a full-service vehicle finance company that provides financial products
and services to consumers and automotive dealers.
Growth in Direct-to-Consumer Exposure. We are working to further diversify
our vehicle finance product offerings by expanding our Web-based, direct-to-consumer
offerings. We are seeking to engage the consumer at the early stages of the
car buying experience. Our RoadLoans.com program is a preferred finance resource
for many major vehicle shopping websites, including Cars.com, AutoTrader.com,
and eBay Motors, each of which have links on their websites promoting RoadLoans.com
for financing. We will continue to focus on securing relationships with additional
vehicle-related websites. We anticipate that the next generation of our Web-based
direct-to-consumer offerings will include additional strategic relationships,
an enhanced online experience, and additional products and services to assist
with all stages of the vehicle ownership life cycle, including research, financing,
buying, servicing, selling, and refinancing.
Expansion of Fee-Based Income Opportunities. We seek opportunities to leverage
our technologically sophisticated and highly adaptable servicing platform for
both prime and nonprime loans, as well as other vehicle finance (including recreational
and marine vehicles) and personal lending products. We collect fees to service
loan portfolios for third parties, and we handle both secured and personal loan
products across the full credit spectrum. Loans and leases sold to or sourced
to banks through flow agreements (including our flow agreements with Bank of
America, CBP and another third party), and off-balance sheet securitizations
also provide additional opportunities to service large vehicle loan and lease
pools. We believe our loan servicing business is scalable and provides an attractive
return on equity, and we intend to continue to develop new third-party relationships
to increase its size.
Our origination platform delivers automated 24/7 underwriting decision-making
through a proprietary credit-scoring system designed to ensure consistency and
efficiency, with dealers receiving a decision in under ten seconds for 95% of
all requests. Every loan application we receive is processed by our risk scoring
and pricing models. Our credit scorecard development process is supported by
an extensive market database that includes 20 years of historical data on the
loans we have acquired as well as extensive consumer finance third-party data.
We continuously evaluate loan performance and consumer behavior to improve our
underwriting decisions. As a result of our readily adaptable and scalable systems,
we are able to quickly implement changes in pricing and scoring credit policy
rules and we seek to modify our underwriting standards to match the economic
environment. Our scorecard methodology supports underwriting decisions for consumers
across the full credit spectrum and has been designed to allow us to maximize
modeled risk-adjusted yield for a given consumer’s credit profile. As
a result of the Chrysler Agreement, we have adjusted underwriting standards
in the prime space to compete with the major lenders in the segment.
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