Wells Fargo Ends Funding to Ind. Car Dealers

One of the nation’s largest banks and automobile credit lenders, Wells Fargo, has said it will stop providing loans to independent car dealers and car lots. If you buy a car from a dealer tied to a car company, typically financing can be obtained through that car company’s affiliated financing company. For instance, if you buy a Ford from a Ford dealer, then Ford Finance may offer financing. Many smaller dealers do not have the tie-ins and have to obtain outside lenders. Sometimes this leads to problems when the dealer sells the car but has not yet obtained a lender to “take” the loan. Well Fargo has been one of those lenders until now.

As CNBC reports:

A Wells Fargo spokeswoman confirmed that the bank, which only makes auto loans through car dealerships, will no longer accept loan applications from most independent shops. Independent dealerships typically sell used cars, unlike franchise dealerships that focus on new vehicles from specific manufacturers.

The bank had “an obligation to review our business practices in light of the economic uncertainty presented by COVID-19 and have let the majority of our independent dealer customers know that we will suspend accepting applications from them,” Natalie Brown, the spokeswoman, said in an email. “The independent dealers we will continue doing business with are those with deep, long-standing relationships with Wells Fargo.”

While there are, of course, many other lenders out there, consumers should be extra cautious when financing a car to make sure lending is secured at signing. This prevents situations like the dealer asking the buyer to bring the car back because no lender would finance the car. This is especially problematic when trade-ins are involved and can lead to unfair terms.