TD Bank is planning a nationwide expansion of its business of providing commercial loans to automotive dealerships.

The $312 billion-asset bank announced this week that its TD Auto Finance subsidiary will now provide floor-plan financing, working capital, revolving lines of credit, construction and business loans to automobile dealers in the western U.S. TD Bank, the U.S. unit of Toronto-based TD Financial Group, already provides those services to car dealers in the rest of the country.

TD Bank signage
Bloomberg News

The decision to expand is the logical next step in TD Bank’s gradual build-out of its commercial services offerings to car dealers, said Chris Howard, the head of the U.S. product group at TD Auto Finance. Moreover, by providing commercial lending services to dealers, TD would be well positioned to capture more business from those dealers' car buyers, Howard said.

“As an indirect lender, you’re just one of many lenders they are dealing with,” Howard said. “When you are the dealership’s floor-plan lender, it puts you in the position to be their primary indirect lender.”

Although consumer debt levels have recently spiked, both in the U.S. and Canada, TD Bank executives are not concerned that the expansion will increase the bank’s risk profile, Howard said. TD Bank’s indirect auto lending is largely made in the super-prime and prime spaces, with only a small portion made in the near-prime space. TD Bank does not engage in subprime auto lending.

“We’re still very bullish on the auto space,” Howard said. “We feel it’s a growth market.”

TD Auto Finance will first market to auto dealerships on the West Coast where it already has formed partnerships for indirect auto lending to consumers, said Anne Kline, head of dealer commercial services. TD will also provide the financial products available to dealers where the bank is not an indirect auto lender.

TD Auto Finance has indirect-loan relationships nationwide with about 6,700 dealerships, Howard said. TD Bank USA held about $22.8 billion in auto loans in its loan book as of Dec. 31, according to BankRegData.com.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.