Canadian AutoWorld: We have heard rumours about a new captive coming to Canada. What’s the story?
Don Romano: That’s right. They’ll start in January and are already setting up shop in Toronto. It will be an extension of the captive in the U.S., Hyundai Capital. It will be called Hyundai Finance here.
Why bring the captive up here now?
If you look at where we are headed from a product and brand perspective and you realize that Canadian banks cannot do leasing, it is overdue.
The product and the growth aspirations both necessitated the need for a captive finance company. We’re one of the few that doesn’t have one and it was really time to take the next step in our evolution and bring them on board. We will continue to work with Scotiabank and maintain both relationships in the mid-term.
I suppose the leasing tap will start to flow?
Our only leasing was through Scotia and Hyundai had to retain all of the residual risk. It is very expensive for us to do that and requires a lot of regulations and a lot of reserves behind it. It’s just not cost effective.
A captive can assume the risk and it makes it more effective. Secondly, there is the loyalty issue. There are a lot of regulations that determine what a bank can share with an automobile company. When it’s your captive, you have much greater capability of working with those companies directly as Hyundai to keep them in a Hyundai and continue to improve business.
Over 30 per cent of the industry in Canada now is leased. We’re at three per cent. When you’re out of a third of the finance market, it’s pretty tough to grow.
Will it be full line or only on higher-priced models?
How do you get a dealer body that has no real experience in leasing ready for that business?
We want to walk forward intelligently and not go overboard. We are going to begin with training in the next few months and get the dealers prepared so we do it when it makes sense and not just as a volume play.
With cars like the Genesis, it’s just a necessity for the type of market we’re catering to. We are currently working with Scotia on the national rollout of a training program.
Will Hyundai Finance offer assistance with capital expenditures and floorplanning as well?
Yes. It will complete on the open market with the banks in that regard. They will be there for the dealers in every respect – wholesale, capital investments; they’ll be a full service captive finance company.
But at the same time, we will also be partners with Scotia and the dealers will continue to use the variety of banking options out there. Their main goal wasn’t to come up here and take over all this business; their main goal was to become a part of the Canadian market and part of our organization and help service the customers as best as possible and to give us that leasing support that we desperately need.
Who will head Canadian operations for Hyundai Finance?