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VW Credit to Charge Fee on Non-VW Service Contracts; Suzuki Will Not Offer Floorplanning

December 30, 2008

Volkswagen and Suzuki are tightening the belt on car buyers and dealers alike with recent announcements about reductions in financing.

Volkswagen dealers learned last week that the automaker’s finance arm will no longer finance 84-month term loans for new and pre-owned vehicles, and will reduce advances for “B,” “C” and “D” paper by 10 percent.

The captive finance company notified dealers of the policy changes in a letter sent Dec. 19, which said all changes will take effect Jan. 6.

“The changes are based on our on analysis of borrower behaviors as well as the respective application profile of the Volkswagen business,” wrote Kevin Kelly, president of Volkswagen Credit, and Horst Meima, vice president of sales and marketing for the company, in the letter.

Volkswagen Credit also said it will no longer finance loans for non-VW-branded vehicles, and will charge a $150 fee to finance non-VW-branded service contracts. The fee, the letter continued, cannot be passed along to the consumers, as it will be deducted from lease and retail loan proceeds.

Additionally, the captive finance company will no longer offer leases and balloon loans on certified VW vehicles.

“Be confident that we are doing everything possible to sustain a competitive position in today’s marketplace,” wrote the two VW executives. “These changes will allow us to increase our focus on the contracts which represent the majority of our mutual business.”

Suzuki dealers were informed a day later that Suzuki Motor Corp. was “forced to abandon” attempts to find a source of wholesale financing for its dealerships, reported Automotive News.

The automaker had been seeking a new source for floorplanning since September, but said in a letter sent to dealers on Dec. 20 that “the economic crisis has deepended, credit had grown tighter than ever, and our financial performance has deteroriated both within the U.S. and globally.”

Suzuki's finance company, American Suzuki Financial Services, is owned by Nuvell, a subsidiary of GMAC Financial Services, and does not provide floorplan financing.

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