business origination at Alphabet and Alphera, the manufacturer
said.
“Our focus is on our core brands. We are therefore limiting our
activities first and foremost to the financing and leasing of BMW
Group products,” BMW said of the decision.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Alphera was set up to provide point-of-sale financing for
customers of non-BMW vehicles, while Alphabet is a multi-marque
fleet management and leasing company, providing cars and commercial
vehicles from all manufacturers to its customers. Both units are
part of BMW’s Financial Services division.
The decision to stop taking on new contracts is “due to the
strong rise in refinancing costs as a result of the financial
crisis”, BMW said, as well as the “difficulty” in reflecting these
higher costs in the rentals paid by customers.
A BMW spokesman confirmed that the decision applied to Alphabet
and Alphera’s global operations.
BMW Financial Services reported a pre-tax loss of €17m (£13.8m)
for the third quarter of 2008, with bad debts and plummeting
residual values blamed for the result, a stark contrast with the
€191m (£155m) pre-tax profit made by the division in the same
period last year. The captive’s risk provision expense for the nine
months to September 30 was €477m, it said.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataNew business at Alphabet, which is part of the Financial
Services division, grew strongly over the first nine months of the
year, up 19.8 per cent on 2007 to 315,351 contracts worldwide.
In its Q3 report, BMW noted the strength of its liquidity base
“despite the current financial crisis”, boasting of access to “a
diversified and flexible range of funding sources” to finance
operations.
“In addition to issuing bonds and commercial papers, this also
includes the use of asset- backed securities, bank credits and loan
notes [which] are primarily used to finance the financial services
business of the BMW Group,” the manufacturer said.
However, BMW chairman Norbert Reithofer commented in a Q3
earnings conference call that earnings take precedence over
volumes.
BMW’s decision to halt new business at Alphabet and Alphera will
remain in effect “until the debt capital markets show signs of a
sustainable recovery” – although it affirmed that it remains
“committed” to the dealer financing and fleet leasing units.
An industry source commented that the decision to stop new
business at Alphera would be “very bad news” for brokers, for whom
Alphera was a major funding partner. “For brokers, the two main
players left to them are GE Money and Santander – and we all know
what’s happening to them in the near future,” the source added,
referring to the forthcoming merger of the two motor finance
providers.
