Start-up automaker Lucid announced Monday that it has chosen Bank of America as its preferred loan partner for Lucid customers applying for new car financing. The new service can be done online at Bank of America, or through agents of Lucid.
âThe strategic relationship between Lucid and Bank of America is another way to improve and streamline the vehicle shopping experience for Lucid customers,â said Amira Aly, director of financial services at Lucid.
Evidence of Lucid’s Business Growth
Lucid began deliveries of Lucid Air in October, and the company says it has more than 17,000 reservations. Adding a Preferred Lender should make it easier for potential customers to purchase one, especially since everything can be managed online.
âThis financing solution was developed for Lucid to make it easier for customers to finance electric vehicles,â said Fabien Thierry, head of vehicle lending products at Bank of America.
A different model of auto financing
Other startups have similar funding terms.
Rivian Financial Services, the finance arm of start-up automaker Rivian, has its own financial arm, but works with Chase as a private label partner in the United States, with Scotiabank providing the same service in Canada.
Likewise, Tesla is working with Wells Fargo and US Bank to organize vehicle financing. All companies claim that financing can be managed digitally and buyers can arrange their own third party financing.
A missed opportunity?
This model is in stark contrast to traditional automakers, which have their own in-house finance companies, providing them with another source of income. In fact, it was General Motors Acceptance Corporation’s ability to finance loans of new vehicles to GM customers that put it ahead of the financially strapped Ford Motor Co. in its early days. ‘automobile industry.
Today, the world’s largest automakers have their own in-house finance companies, such as GM Financial, Credit Ford, Stellantis Financial Services United States, Toyota Financial Services, Honda Financial Services, Mercedes-Benz Financial Services and many more.
But Lucid’s absence from a captive financial branch stems from a lack of liquidity, a common problem for newbie carmakers like Lucid, Rivian, and evevn Tesla, who make more money selling credits than they do. selling cars.
âIt takes a lot of capital to get started and Lucid doesn’t have the kind of money it needs to lend to customers,â said Sam Fiorani, vice president, global vehicle forecasting at AutoForecast Solutions LLC. The money companies have is used to create their new products and establish manufacturing facilities, service centers and other costs.
Fiorani says the new companies will most likely establish captive financial arms once they have the money.
Captive financiers take out most of new car loans
The absence of a captive financing arm is not insignificant, given that 85% of new car purchases are paid for by an auto loan. Of these loans, 70% are made through auto dealers, according to the National Automobile Dealers Association. With that kind of revenue flowing to partners like Wells Fargo, Chase, and US Bank, look for Lucid and his competitors to get into financing as soon as company finances allow.