BANGOR, Maine – Beginning next month, Bangor Savings Bank no longer will work with car dealerships that connect customers with lenders.
Bangor Savings will continue to offer auto loans to customers who come to bank branches. But senior vice president Yellow Light Breen said that, effective Oct. 1, the company will stop participating in “on-the-spot” financing programs offered by dealers.
These programs, also known as dealer or indirect financing, involve the dealer acting as an intermediary between the customer and a bank.
“The most fundamental reason is we are focusing on trying to build long-term relationships with customers on their primary banking needs,” Breen said Friday. “While it has been a profitable business for us, we really have almost no success turning those auto loan customers through dealers into true banking customers.”
The roughly 35,000 customers who already have auto loans from Bangor Savings Bank will not be affected by the decision, Breen said.
Bangor Savings Bank has been ratcheting down its participation in dealer financing programs in recent years. Breen described the industry as a tough business dominated by national lenders including large banks and financing programs offered by the vehicle manufacturers.
“We’re doing it solely in Maine so we will never have the economy of scale they have,” he said. Nonetheless, the Bangor-based bank now has about $400 million worth of auto loans with customers.
Breen said the decision has no connection to the current national credit crunch being driven by rising home foreclosure rates. Bangor Savings reported record earnings for the year that ended March 31, deposits are growing and the bank is seeing a “very good year” for mortgage lending despite the national slowdown, Breen said.
Bangor Savings apparently is not the only lending institution to get out of the dealer financing game.
Ron Russell, director of Bangor operations for Darling’s Automotive, said several banks have withdrawn from the programs in recent years. Russell said Bangor Savings also has decreased its presence in the field recently, so he was not entirely surprised by the institution’s departure.
Several dozen lending institutions still participate in Darling’s financing program, however.
“Competition is good for customers … and it was competitive,” Russell said. “In the short term, I don’t think it is going to affect customers much.”
Breen said dealer-facilitated loans represent the “vast, vast majority” of Bangor Savings’ auto financing contracts; however, customers still will be able to receive direct loans from the bank.
Bangor Savings Bank operates more than 50 branches around the state and has more than $2.2 billion in assets.