Volkswagen and Wells Fargo Partnership Provides Advantages for Dealers

Authored by, Jayson C. , Managing Director with Haig Partners

On September 16, 2024, Volkswagen Financial Services U.S. (VWFS) and Wells Fargo unveiled a strategic partnership that will see Wells Fargo Corporate & Investment Banking become the preferred retail financing provider for Volkswagen , 奥迪 , and brands in the U.S., beginning in April 2025. This shift marks a key evolution in how these brands handle vehicle purchase financing, with VWFS maintaining its focus on leasing, mobility solutions, and dealer support.

At Haig Partners, we monitor trends that affect dealership valuations closely, and this partnership promises several advantages for dealers. However, with any transition of this scale, questions naturally arise. Let’s dive into the key benefits and considerations for dealers.

Key Points:

1. Lower Cost of Funds: A major upside is the potential for reduced financing costs. Wells Fargo’s significant scale and expertise in auto finance could lead to more competitive rates, which would benefit customers and, in turn, drive higher sales volumes at dealerships.
2. Enhanced Subvention Programs: The ability to offer lower financing rates can also expand incentive programs. This would allow for deeper buy-down opportunities, making vehicles more affordable—an important factor given current consumer concerns around affordability.
3. Leasing Continuity: Leasing remains a crucial aspect of the business for both Volkswagen and Audi. I estimate that leasing accounts for 80% or more of Audi’s U.S. sales and 30% of Volkswagen’s. VWFS will continue to handle leasing and customer service, ensuring minimal disruption for dealers, while Wells Fargo steps in to manage retail financing.
4. Proven Success with Bank-Owned Captives: While Wells Fargo taking on this role may seem bold, it’s not without precedent. JPMorgan has successfully operated as the private label finance partner for several brands. Recent J.D. Power surveys ranked Jaguar Land Rover Financial and Maserati Capital #1 and #2 in the luxury segment, with Subaru Motors Finance ranking #2 in the mass market segment. These examples highlight how a bank-owned captive finance structure can drive success for both dealers and customers.
5. Wells Fargo’s Automotive Experience: Wells Fargo’s long-standing presence in automotive retail financing, dating back to the days of WFS, means they bring deep expertise to this partnership. This isn’t new territory for them.

Understandably, some logistical concerns have surfaced, with dealers asking how the transition will impact existing loan terms and day-to-day operations. It’s expected that Volkswagen will soon address many of these questions, offering clarity to its dealer network.

I align with Charlie Hall , VW Dealer Council President, in believing that this partnership will enhance dealership profitability. Each party in this partnership is positioned to focus on their strengths—Volkswagen on product innovation and addressing parts delays, and Wells Fargo on providing top-tier retail financing.

I am interested in your thoughts regarding the transition. Email me at Jayson@HaigPartners.com.

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