Chrysler Financial Loosens Terms for Dealers

After in mid-July Chrysler Financial announced it was toughening terms for dealers and asked them to pay large amounts of money to handle possible loan losses, the financial organization softened its position and last week offered dealers easier terms to establish expensive reserve funds.

The easier terms have been explained by Chrysler Financial as a result of the Car Allowance Rebate System (CARS) program, which has brought the finances of many dealers to their limits.

The decision was made after some dealers complained the reserves threatened their financial stability. Chrysler however says the reserves are needed to cover loan payoffs and defaults of consumer loans.

The softening of terms comes in the form of telling dealers they don't have to pay the reserves all at once, but can do it in the form of monthly installments. Additionally, Chrysler Financial also announced it may recalculate amounts for dealers who wanted to pay them all at once.

"We all have to be very thankful that CF has released the dealers' obligation to pay one lump sum and giving us other options to pay monthly," dealer Jim Arrigo was quoted as saying by Autonews.

The reserves had been an obstacle for dealers who wanted to pass over to GMAC or other lenders.

The financial institution is asking every dealer for sums ranging from $75,000 to $250,000 as a back-up to cover risks such as early loans payoffs or default of customer loans.

Chrysler Financial was rejected by the US government as Chrysler's Group captive finance company in favor of GMAC Financial Services.