An increasing number of commercial banks are attracted to the automotive retail sector, said Greg Young, chief accounting officer at Sonic Automotive, which expanded its commercial bank lender base for its recently completed $1.2 billion revolving credit facility. The new facility replaces an expiring $550 million revolver.
Historically, the company had used captive auto lenders for credit facilities. It broke into the bank lending market for the first time in February 2003. The company uses a combination of commercial and manufacturer-affiliated finance companies. Using both types of lending institutions has many advantages, said Young. "Captive manufacturer banks understand the dealership model, while commercial banks provide lower cost of capital," he said.
The new revolver, priced at LIBOR plus 2%, is 55 basis points cheaper than its previous facility. The revolver contains a new $150 million used-vehicle inventory floor plan financing component priced at LIBOR plus 1 1/8%. Bank of America and JPMorgan are the lead arrangers.