Wells Fargo says it plans to halt independent auto dealership loans. A spokeswoman for Wells Fargo confirmed that in May, the San Francisco-based lender sent hundreds of dealerships letters notifying them that they would no longer loan them money. At that point, Wells Fargo only loaned money for automobiles through car dealerships. It will no longer be accepting loan applications, however, from the majority of independent auto businesses.
Independent dealerships are typically focused more on selling used cars, rather than the new ones sold by franchise dealerships dealing with major auto brands.
Natalie Brown, Wells Fargo spokeswoman, noted that Wells Fargo had “an obligation to review our business practices in light of the economic uncertainty presented by COVID-19 and have let the majority of our independent dealer customers know that we will suspend accepting applications from them.”
Brown said the remaining independent dealerships that they’ll continue to work with are the ones Wells Fargo has “deep, long-standing relationships with…”
Of the more than 11,000 auto dealers that Wells Fargo sells loans to, independent auto shops make up under 10 percent of its dealers.
The coronavirus pandemic is said to be a primary driver for discontinuing the loans. Before COVID-19, Wells Fargo’s auto loan division was surprisingly thriving since the company had to pay a $1 billion fine in 2018 for having its customers pay for unneeded car insurance. After that, the company restructured its auto loan unit. Well’s Fargo’s first quarter growth was 19 percent, or $6.5 billion, for its auto loan segment.
Since its mishap two years ago, the auto lender expanded its auto loans division and held $48.6 billion in loans by the end of the first quarter this year. Only its mortgage loan division did more volume. But, the lender has also stepped back a little from its mortgage market since the coronavirus outbreak. It temporarily paused new loans for home equity lines of credit beginning in May.