Economy, Auto

Volkswagen Targeting Used-Car Financing

Volkswagen Targeting Used-Car FinancingVolkswagen Targeting Used-Car Financing

The VW Group's captive financing operation believes growth opportunities in the new-car market are slowing and now plans to offer the same mix of financing products for used cars as it does for new cars.

By 2025, the share of new contracts should be roughly even from only as low as one-quarter for used cars currently, Automotive News reported.

"You earn more money in used-car financing," the unit's finance chief, Frank Fiedler, said in a press briefing on Monday.

"The net margin is better and the added risk [of a default] is priced into the loan. And the market accepts that–everywhere."

The division has hiked its earnings outlook for this year after strong growth in signing new contracts during the first quarter.

The unit is gaining new business with maintenance, inspection and guarantee extension deals, won thanks in part to VW's efforts to win back customer trust after the group's automaking business was hit by the diesel emissions-rigging scandal.

The division now expects to match last year’s operating profit of €1.9 billion, an all-time high, after previously forecasting it would earn at least the €1.7 billion posted in 2014.

"The trust-building campaign was a second growth driver for services and we believe it also has a permanent effect since dealers have realized they are a core product," said the unit's sales chief, Christian Dahlheim.

Fiedler said the new business "was not planned in, hence the better forecast".

The unit plans to increase its portfolio of income-generating assets to 30 million insurance, services and financing contracts from last year's 16.6 million.