Subaru Corporation (TSE:5383) and its North American partners, Subaru of America, Inc. (NASDAQ:SDBA) and Subaru Canada, Inc. (TSE:5383) are making a major step change in support for vehicle financing throughout North America. The automaker has announced it will create a new captive finance arm, offering financing directly to customers, retailers and dealers in the U.S. and Canada. This transfer is part of Subaru’s overall expansion plan and enhances the company’s customer and dealer relationships while improving the possibilities for long-term customer retention.
The captive finance unit will be expected to deliver a wide variety of services such as retail vehicle loans, vehicle leasing and floor plan financing for authorised retailers and dealers. Such integration of services would provide Subaru with more flexibility in addressing its sales force and provide a more integrated buying environment for customers. Subaru expects to achieve full scale-up in 2030 in both markets, which will not be a wholesale change to current financing models, but will be a multi-year strategy.
During the transition, Subaru of America wanted to keep that stability going, so the two companies have collaborated to keep financial services coming to the United States via Subaru Motors Finance. Subaru Canada has also continued their partnership with Toyota Credit Canada Inc. (TCCI) to provide support for Subaru Financial Services (SFS) going forward. Current auto loans and car leases will not be impacted and customers and dealers will continue to receive financial services as Subaru works to create a future captive finance platform.
1. Building a Direct Captive Finance Business
Subaru’s move into the captive finance market puts the company closer to activities that, like vehicle sales and ownership, are a direct way to the customer. Subaru will, at some time in the future, be able to independently handle the critical financing functions of the company, as opposed to solely depending on external financial institutions. The building will provide a link between the company’s business and dealerships and customers, as well as supporting the company’s overall retail strategy.
Finance Flexibility:
- Direct Control Over Automotive Financing
- Retail Loans And Leasing Services
- Dealer Floor Plan Financing
- Integrated Customer And Dealer Support
- Greater North American Finance Flexibility
The planned platform will include many major facets of automotive financing. Customers will be offered vehicle loans and leases, and authorised retailers/dealers supported with floor plan finance. The pair enables Subaru to champion both sides of the retail equation, providing tools to help customers make their vehicle purchases and dealers to help control their inventories.
The plan will also give Subaru more flexibility as its North American business grows. Access to financing can impact both vehicle affordability and purchase decisions, lease activity and inventory management by the dealership, and a dedicated captive finance group may help the automaker manage these aspects more efficiently. The company’s vision for the future is to embed finance into the overall customer and dealer experience.
2. A Transition Planned Through 2030
Subaru has committed to 2030 as the year that it will be operating direct captive financing in the United States and Canada. The move in its early stages will take a few years, so the company is continuing with the financial relationship they already have with the companies in question to avoid any disruption. With this method, Subaru can develop its new platform while existing owners and retailers remain on the old platform’s financial services.
Customer Continuity:
- 2030 Target For Direct Financing
- Existing Financial Partnerships Continue
- Chase Supports U.S. Operations
- Toyota Credit Supports Canadian Operations
- Existing Loans And Leases Unaffected
Subaru of America continues its collaboration with Chase in the United States. During this time, Subaru Motors Finance will continue to provide financial services to Chase. Keeping this relationship will allow Subaru and its dealerships to be ready for the upcoming move to a new relationship system without making current customers change their approach to managing their financing.
It’s the same in Canada, where Subaru Canada is continuing to work with Toyota Credit Canada Inc. Financial services will remain available during the move, under the name Subaru Financial Services by TCCI. Existing loans and leases will also be unaffected, with Subaru stating there will be continuity for current customers while the new business structure is built, and that the company will also have a global headquarters in Japan.
3. Strengthening Customer Relationships
One of the main goals of Subaru’s plan is to make the automaker more customer friendly. Chairman and Chief Executive Officer of Subaru of America and President and Chief Executive Officer of Subaru Canada, Yoichi Hori, said that entering the captive finance business “can help to get retail distribution closer to the corporate support.” The strategy will be designed to provide lasting value for the customers, retailers, shareholders and other partners.
Financing Relationships:
- Closer Automaker And Customer Connections
- More Ownership Journey Interaction
- Financing And Leasing Relationships
- Greater Customer Loyalty Opportunities
- Unified Vehicle Ownership Experience
Subaru may also be able to stay in touch with customers over the course of their car’s life through direct financing. The relationship would not necessarily come to an end if a vehicle is bought, as financing, leasing, renewal, and eventual replacement options are all ways that could increase points of interaction. This is another avenue the auto manufacturer has to assist with customer retention over the long haul.
Hori also noted that customer retention is a key element for Subaru to consider in developing a new platform going forward. The integration of vehicle sales and financial services could help to streamline the ownership experience for Subaru customers. The objective isn’t to be another financing choice, it’s to create a system that helps customers and retailers throughout the whole vehicle ownership experience.
4. Supporting U.S. Retail Operations
The captive finance plan is closely tied to the plan to make Subaru a stronger player in the U.S. market for the American sales and operations. Subaru of America President and Chief Operating Officer Jeff Walters said the move is a proactive step to further engage customers and retailers. The new building will serve as a solid base for Subaru’s future expansion.
Dealer Support:
- Stronger U.S. Retail Position
- Expanded Customer And Dealer Relationships
- Continued Chase Financial Partnership
- Stable Transition For Stakeholders
- Reliable Dealer Financing Support
Walters also stressed the role of Chase being a financial partner throughout the transition. As Subaru works to develop the new platform, working with an existing financial institution brings comfort to customers, retailers and other stakeholders. This strategy will be a blend of the established services and the future goal of an in-house financing plan.
For dealers, this continuity is especially crucial as it relates to the financing process and its day-to-day retail use. Dealers rely on consistent financing for the support of inventory and transactions with customers, so a phased transition minimizes the risk of disruptions in operations. So, Subaru’s approach is a blend of long-term structural shift and short-term stability in its U.S. retail business.
5. Expanding Subaru Canada’s Market Strategy
In its efforts to prepare for the future captive finance business, Subaru Canada is also following a similar trend. Aaron Wisel, Executive Vice President and Chief Strategy Officer of Subaru Canada, said it is a part of the company’s strategy for boosting sales and market share. The financing system should enhance Subaru Canada’s customer and dealer connections.
Market Growth:
- Future Canadian Finance Platform
- Support For Vehicle Sales
- Dealer Inventory Financing
- Closer Canadian Customer Relationships
- Long-Term Market Growth Strategy
If Subaru Canada has a direct finance business, it can provide its network of dealers with further tools to assist in the sale of its vehicles. Financing and leasing programs can affect a decision to buy and dealer financing can help manage inventory. Moving these functions into a dedicated platform for Subaru would then help the company better tie financial services to its retail goals.
Wisel also stressed the opportunity for closer relations with Canadian customers. The planned platform will be designed to provide opportunities to enhance the customer and dealer experience and enable for future growth. Subaru Canada’s transition like the U.S. program does not involve a one-time switch from existing financing services but rather, a long-term strategy.
6. Financing as a Retail Support Tool
Automakers may have more control over financing that helps to move vehicles through the car park if they have captive finance facilities. The anticipated platform could offer greater flexibility over retail loan, lease programs and dealer floor plan financing for Subaru. These services play a crucial role in the automotive retail journey, affecting not just customer choices but also the dealers’ inventory management.
Customer Retention:
- Greater Financing Program Control
- Flexible Retail Loan Options
- Coordinated Lease Program Development
- Support For Dealer Inventory
- Stronger Customer Retention Opportunities
The direct management of financing may also provide Subaru with more opportunities to create programs that meet new market demands. Financial incentives may affect showroom usage; flexible lease agreements may be attractive to customers with varying preferences for car ownership. A finance operation dedicated to this could enable Subaru to better synchronize the programs with its vehicle sales strategy.
The plan also ties financial services to customer retention. If the dealership continues to be in the loop until the car has been sold, and the dealership is also involved until the car is paid off or the lease is over, then the dealership has more chances to nurture the relationship with the customer. This means that future financing or replacement options can be added to a longer-term relationship between Subaru and its car buyers.
7. Creating a More Connected Buying Experience
The trend of direct financing is part of a larger retail landscape in which consumers are looking for easy and transparent buying practices. Today’s dealership experiences may integrate online research, vehicle comparisons, trade-in appraisals, financing applications, and face-to-face support. The financing process at Subaru can be a next part of the going digital journey in the purchase process.
Financial Support:
- Connected Modern Vehicle Shopping
- Online And In-Person Purchasing
- Flexible Financing And Leasing
- Simplified Customer Buying Process
- Integrated Financial Retail Support
People can already shop vehicles through a variety of channels, according to their preferences. Some consumers will do research on the web before they even go into a showroom and others will opt for face-to-face help from dealership teams. Flexible financing and leasing options can help both methods by providing shoppers with additional options in completing the purchase.
More generally, the goal is to simplify vehicle ownership. A financing specialist can ensure that customers are aware of the programs available, and on-line pre-approval processes can help to streamline some of the administrative tasks associated with the customer buying a car. This is where the new captive finance subsidiary might play a role in enhancing the link between retail services and financing for Subaru.
8. Dealer Networks and Long-Term Retail Support
Subaru’s dealership network is a key component of the plan since it is the main gateway for Subaru and many consumers. Subaru of America runs its business in the U.S. through about 640 authorized retailers nationwide. The company has a robust foundation in the retail business in both markets, with Subaru Canada having 96 authorized dealers.
Retail Experience:
- Extensive North American Dealer Network
- U.S. Authorized Retailer Support
- Canadian Dealer Network
- Dealer Floor Plan Financing
- Consistent Customer Retail Experience
The car dealers are very interested in floor plan financing since it helps the inventory aspect of automotive retail. Good access to finance enables retailers to keep their vehicle stocks and to deal with the financial needs of new products. This could help bolster Subaru’s support for its retail partners if it makes this service part of its future captive finance system.
This increased engagement can also help to provide a more uniform customer experience. If the corporate funding plan and dealership operations are coordinated, the retailers can get more specialized support and the customers a more integrated buying process. With the planned platform, that relationship will be strengthened in the long term.
9. Supporting Subaru’s Broader Corporate Identity
The financing initiative is a part of Subaru’s overall sustainability, community engagement and customer strategy. Subaru has been stressing environmental responsibility since the beginning, and all products are made in zero-landfill manufacturing plants. Subaru of Indiana Automotive is also National Wildlife Federation recognized as a backyard wildlife habitat.
Customer Relationships:
- Commitment To Environmental Responsibility
- Zero-Landfill Manufacturing Operations
- Subaru Love Promise® Initiative
- Community Contributions And Volunteering
- Customer And Community Relationships
The Subaru Love Promise®, which centers on displaying love and respect to our customers, employees and communities, is also an integral part of Subaru’s corporate identity. During the last 20 years, approximately $340 million has been donated to causes by Subaru of America and the SOA Foundation and over 115,000 hours of volunteer work have been logged by SOA employees. The company’s commitment to community engagement is part of its overall campaign to focus more on community than on cars.
That’s a bigger picture approach that the new financing plan brings. Financing is more of a business function but Subaru considers this project to be a means to help solidify the bond between customers and dealers, and to further enhance future growth. The company is thus aligning its financial growth with a broader strategy to grow enduring relationships North American markets.
10. Preparing for Long-Term North American Growth
The company’s captive finance initiative is an important strategic move for its North American business. The automaker says the retailer-focused platform will enable it to be more flexible when it comes to servicing customer and retailer needs, as retail loans, vehicle lease financing, and dealer floor plan financing will now be consolidated there. The 2030 target gives the company time to build up the structure in the process of maintaining current financial relationships.
Future Opportunities:
- Dedicated North American Finance Platform
- Long-Term Retail Growth Strategy
- Continuity During Business Transition
- Stronger Dealer And Customer Relationships
- Future Sales And Retention Opportunities
The long-term tie-ups with Chase, in the U.S., and Toyota Credit Canada Inc., in Canada, are valuable bridges in this development phase. No short-term loan or lease changes will affect existing customers; and dealers will be able to continue leveraging their financial services. This planned evolution enables Subaru to continue its long-term goal without disrupting existing business.
In the future, direct financing is likely to be more tightly linked to product availability in North America as Subaru moves towards 2030. Better alignment among the automaker, dealer and customers could help boost sales, financial agility and new avenues to retain customers. Subaru is laying the groundwork for long-term customer loyalty, established dealer relationships and ongoing financial relationships, creating a new platform for sustainable growth throughout the United States and Canada.
