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Profile: Santander Consumer USA Holdings Inc (SC.N)

SC.N on New York Stock Exchange

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Santander Consumer USA Holdings Inc., incorporated on July 1, 2013, is the holding company for Santander Consumer USA Inc., and subsidiaries, a consumer finance company focused on vehicle finance and third party servicing. The Company operates through Consumer Finance segment. Its Consumer Finance business is focused on vehicle financial products and services, including retail installment contracts, vehicle leases, and dealer loans, as well as financial products and services related to motorcycles, recreational vehicles (RVs), and marine vehicles. It also includes its personal loan and point-of-sale financing operations. The Company's primary business is the indirect origination and securitization of retail installment contracts, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers. The Company offers auto financing products and services to Fiat Chrysler Automobiles US LLC (FCA) customers and dealers under the Chrysler Capital brand. These products and services include consumer retail installment contracts and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit.

The Company offers vehicle-related financing products, primarily consisting of consumer loans and leases, and servicing of such assets. Its origination platform delivers automated around the clock underwriting decision-making through a credit-scoring system. Every loan application it receives is processed by its risk scoring and pricing models. Its credit scorecard development process is supported by a market database that includes 20 years of historical data on the loans that it has acquired, as well as consumer finance third-party data. It continuously evaluates loan performance and consumer behavior to improve its underwriting decisions. The Company's scorecard methodology supports underwriting decisions for consumers across the full credit spectrum and is designed to allow it to manage modeled risk-adjusted yield for a given consumer's credit profile. Its servicing activities consist of processing customer payments, responding to customer inquiries (such as requests for payoff quotes), processing customer requests for account revisions (such as payment deferrals), maintaining a perfected security interest in the financed vehicle, monitoring vehicle insurance coverage, pursuing collection of delinquent accounts, and remarketing repossessed or off-lease vehicles.

Consumer Vehicle Loans

The Company's primary business is to indirectly originate vehicle loans through automotive dealerships throughout the United States. It has a dealer network, which includes manufacturer-affiliated or independent dealers. It uses a risk-adjusted methodology to determine the price to pay the automotive dealer for the loan, which may be above or below the principal amount of the loan depending on characteristics, such as the contractual annual percentage rate (APR) and the borrower's credit profile. The consumer is obligated to make payments in an amount equal to the principal amount of the loan plus interest at the APR negotiated with the dealer. The consumer is also responsible for charges related to past-due payments. Dealers may retain some portion of the finance charge as compensation. Its agreements with dealers place a limit on the amount of the finance charges they are entitled to retain. Loans with below-market APRs are offered through manufacturer incentive programs. The manufacturer will compensate the originator of these loans for the amount of the financing rate that is below market. These payments are called rate subvention. It is entitled to receive rate subvention payments from FCA. It also directly originates loans through its branded online RoadLoans.com platform. The loans acquired in bulk acquisitions have primarily been collateralized by automobiles. However, a small amount of such loans have been collateralized by marine and recreational vehicles. It generates revenue on these loans through finance charges.

Vehicle Leases

The Company acquires leases primarily from FCA-affiliated automotive dealers and, as a result, become titleholder for leased vehicles. The acquisition cost for these leases is based on the underlying value of the vehicle, the contractual lease payments and the residual value, which is the expected value of the vehicle at the time of the lease termination. It uses projected residual values that are estimated by third parties, such as Automotive Lease Guide (ALG). The residual value it uses to determine lease payments, or the contractual residual value, may be adjusted upward as part of marketing incentives provided by the manufacturer of the vehicle. The marketing incentive payment that manufacturers pay the Company is equal to the expected difference between the projected ALG residual value and the contractual residual value. This residual support payment is a form of subvention. It is a preferred provider of subvented leases through Chrysler Capital. All of these leases are to prime consumers. The consumer, or lessee, is responsible for the contractual lease payments and any excessive mileage or wear and tear on the vehicle that results in a lower residual value of the vehicle at the time of the lease's termination. The consumer is also generally responsible for charges related to past due payments. Its leases are primarily closed-ended, meaning the consumer does not bear the residual risk. It generates revenue on leases through monthly lease payments and fees and, depending on the market value of the off-lease vehicle, it may recognize a gain or loss upon remarketing. Its agreement with FCA permits it to share any residual losses over a threshold, determined on an individual lease basis, with FCA.

Servicing for Others

The Company services a portfolio of vehicle loans originated or otherwise independently acquired by Santander Bank, N.A. (SBNA), as well as vehicle leases originated by SBNA under terms of a flow agreement with it. It also services loans sold through its flow agreements, and through its Chrysler Capital off-balance sheet securitizations, as well as several smaller loan portfolios for various third-party institutions. It generates revenue on these assets through servicing and other fees collected from the institutional owners and the borrowers, and may also generate a gain or loss on the sale of assets.

Company Address

Santander Consumer USA Holdings Inc

1601 Elm St Ste 800
DALLAS   TX   75201-7260
P: +1214.6341110
F: +1302.6365454

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