Connecticut’s auto finance industry is heating up.
Just a few years after many Connecticut car dealers saw access to credit dry up following the 2008 financial crisis, banks are rushing back into the market flush with cash to finance inventory, real estate and consumer loans, industry experts say.
Large, national banks that either tightened their purse strings or threatened to exit the market are reopening their loan spigots. And a major new player in auto financing — Ohio’s Huntington Bancshares Inc. — is entering the Connecticut market for the first time.
The credit thaw comes as many Connecticut auto dealers say they are experiencing a boost in sales, mirroring a national trend that could spell a bit of good news for a slow moving state economy.
“The availability of consumer credit and commercial financing for the auto industry is good right now,” said James T. Fleming, president of the Connecticut Automotive Retailers Association.
Access to credit serves as the lifeblood for many businesses, but auto dealers in particular depend on banks to finance their inventory and real estate, as well as to provide loans to customers looking to purchase a vehicle.
When the financial crisis hit, however, many banks pulled back on floor-plan financing, the money that allows dealers to purchase vehicles from manufacturers and carry them on their lots until they find a buyer.
The problem was especially felt in Connecticut. Nearly 45 dealers in the state received notice from Sovereign Bank, which has since been acquired by Santander, that it was getting out of the floor-planning business, and that dealers had to find an alternative source of financing.
Other banks severely tightened their lending credit standards, Fleming said, forcing auto dealers to pledge their personal wealth as collateral to guarantee a loan.
The situation caused 85 dealers to close up shop around the state, Fleming said.
But better days appear to be here.
Fleming said many of the big banks have jumped back into the business including Bank of America and Santander. Captive finance companies like Ford Motor Credit are also more active, along with regional lenders.
The entrance of Huntington Bancshares should also shake up the market, industry experts say. The parent company of The Huntington National Bank, which has $56 billion in assets, has been slowly expanding in New England over the past few years, but is now making an aggressive push to win business in Connecticut.
Huntington has already hired bankers with in-state ties and brokered agreements with several Connecticut auto dealers, industry observers say.
Scott Torello will be Huntington’s market leader and retail relationship manager in Connecticut, signing and servicing automobile dealerships. Torello was recently at RBS and has more than 16 years of auto finance experience — all in the Connecticut market.
Meanwhile, Jeremy Menning will direct Huntington’s credit buying in the state. He formerly worked at RBS and Wells Fargo in Connecticut.
Rich Porrello, director of Huntington Automobile Finance, said the company will operate out of a Westwood, Mass., office and offer a mix of indirect consumer loans and commercial lending services. That includes real estate, inventory and acquisition financing, Porrello said. Huntington operates in 16 states, including a half-dozen New England states.
“It is very important that when we expand in a state we have the right expertise and infrastructure in place,” Porrello said.
The improving credit conditions come at a time when auto sales appear to be up in Connecticut and across the country.
The U.S. is expected to surpass 15 million car sales in 2013 for the first time in years. In Connecticut, new car dealers expect total sales to surpass $9 billion in 2013, up from $8.5 billion a year earlier, according to the Connecticut Automotive Retailers Association.
Mike Lynch, president of Lynch Toyota in Manchester, said new car sales at the 20 Connecticut Toyota dealers are up 6.8 percent so far this year.
Collectively, they’ve sold 6,994 cars through the month of May, up from 6,543 motor vehicle sales during the same time period in 2012, Lynch said.
“I think it’s a positive sign for the economy,” Lynch said. “The industry is doing very well.”
Art Schaller, president of Schaller Auto World with dealerships in Berlin, New Britain and Manchester, said the boost in sales is likely a result of several factors including rising consumer confidence and greater availability of credit.
Many consumers also put off new car purchases for years because of economic uncertainty.
The average U.S. car or truck is 11 years old, according to automotive-research firm Polk. That is a year older than the average U.S. fleet age in 2010.
“People are replacing cars because they have to,” Schaller said.
