By Jessica Menton
Wells Fargo, one of the largest lenders for purchases of new and used cars, is no longer making auto loans to most independent car dealerships, a sign the bank is concerned about defaults in the wake of the pandemic.
In May, Wells Fargo sent letters to hundreds of independent auto dealerships — which typically sell used cars — telling them that the bank was dropping them as a customer, CNBC reported.
“As a responsible lender, we also have 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, a spokesperson at Wells Fargo, confirmed in an email. “The independent dealers we will continue doing business with are those with deep, long-standing relationships with Wells Fargo.”
It marks an about-face for the bank after it had been growing its auto lending business ahead of the deadly outbreak. Auto loan originations, for instance, rose 19% in the first quarter to $6.5 billion.
“Like lenders across the country, we are doing everything we can to help customers weather the economic impacts of this health crisis, including offering loan deferrals to customers who need them if they’ve been impacted by COVID-19,” Brown said.
Economic uncertainty has weighed on the bank’s other lending businesses as well. Wells Fargo, along with JPMorgan Chase, recently suspended applications for home equity lines of credit because of uncertainty from the pandemic.