ORLANDO — Banks involved in automotive lending have lost market share to credit unions, and they are being told they will probably lose more to manufacturer-owned finance companies unless they build closer relationships with car dealers.

That message was delivered by Michael Charapp, counsel to the Virginia Automotive Dealers Association and keynote speaker at the Consumer Bankers Association’s Automotive Finance Conference here last week.

The value of the automotive finance market grew 116% from 1989 to 1998, Mr. Charapp said, to $451 billion. Yet banks’ share declined, falling from 43.1% in 1989 to 35.1% a decade later.

Credit unions picked up much of what banks lost. Their share of the market stood at 21.9% in 1998, compared with 15.9% in 1989. Still, Mr. Charapp said, banks’ stiffest challenge is yet to come — from the automakers themselves. That’s because the manufacturers can use their increasingly popular Web sites to sell cars — and the money needed to buy them.

Leads coming off the Web site to dealers “are going to be shrink-wrapped,” Mr. Charapp said. “Customers will know what car they want to buy, how much they are going to pay, and who they are going to borrow from. That’s a problem.”

It’s a problem because, like the manufacturer-owned finance companies, most banks that are heavily involved in automotive lending make their car loans indirectly, through dealers. More loans for General Motors Acceptance Corp., Ford Motor Credit, and other manufacturer-owned finance companies means less business for banks.

And the manufacturers, who often make the loans dealers use to build or expand their businesses, already possess considerable leverage, which they use to full advantage, Mr. Charapp said. Automakers already require dealers to steer the best finance deals to them, he said.

“They tell their dealers, ‘We know you’ve got to send some to the banks, but that’s what B and C credit is for,’ ” Mr. Charapp said.

Mr. Charapp’s speech clearly struck a nerve among the more than 700 people attending, and it created buzz throughout the three-day conference. John F. Chimento, president of First Virginia Credit Service Inc., the automotive financing arm of Falls Church-based First Virginia Banks Inc., said Mr. Charapp’s comments were “right on target.”

Banks and consumer finance companies are fighting back. Some have asked the Justice Department to review the tactics of the manufacturer-owned finance companies for possible antitrust violations. And in Arizona, a bill was passed last year to ban online financing by automakers. Automobile companies are suing to invalidate the Arizona statute.

Mr. Charapp said the best way for banks to combat the manufacturers is to make “an overall institutional commitment to fully service their dealer clients.

“You’re their hometown banks. That’s your advantage,” he said.

Faced with the fierce competition Mr. Charapp described, a number of banks have gotten out of automotive lending.

But First Virginia Banks remains bullish on the sector, with a car loan portfolio that exceeds $3.2 billion. Echoing Mr. Charapp, Mr. Chimento said relationship banking is the key to its success.

“It may start out as a transaction, but we want it to grow into a relationship,” he said.

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