Venturing into a business whose losses have caused several banks to beat a retreat, J.P. Morgan Chase & Co. and Wells Fargo & Co. on Monday announced a partnership with AmeriCredit Corp., the largest U.S. auto lending company, to finance and operate an Internet-based auto lending firm called DealerTrack.

DealerTrack, of Garden City, N.Y., is a business-to-business company that works directly with automobile dealerships, which can submit applications for free from customers who want to lease or buy cars. Online applications are reviewed by the banks on the network - which so far include only the three founding partners but will soon include more - and the lenders' bids come back to the dealer.

The three companies have been testing the system since 1999, and say they now have more than 4,000 auto dealers on their network. They say they are optimistic about the auto lending business despite recent negative trends in the sector. So many cars have been coming off-lease that the value of the vehicles has plummeted, and banks involved in leasing financing - including Bank One Corp., Bank of America Corp., and Huntington Bancshares - took heavy financial hits last year related to their residuals portfolios.

The equity partners behind DealerTrack would not say how much money they were putting up front for the company, but did say they anticipated that the automation of the lending process would jump-start that industry's conversion to the Internet, saving money for all involved.

"It will make the [auto lending] process as easy as going from manual to automatic transmission," said David A. Coulter, the J.P. Morgan Chase vice chairman who heads LabMorgan and the bank's retail and middle market businesses. LabMorgan, the e-finance arm of J.P. Morgan Chase, is the division that has made an equity investment in DealerTrack.

The executives behind DealerTrack said their system would expand the number of lenders that have access to any given loan application, and shorten the turnaround time for approvals. Dealers, they said, also would be able to view the status of applications and contracts, which would reduce lenders' processing costs and aid dealers' efficiency.

"We see DealerTrack as the backbone of our own future [auto lending] infrastructure," said Norman Buchan, a J.P. Morgan Chase executive vice president and president of Chase Auto Finance. He predicted that DealerTrack would "revolutionize the auto finance industry, much in the same way that ATM networks revolutionized the banking industry."

Dealers pay nothing to participate, but lenders pay a transaction fee, which is negotiated with each institution individually on a sliding scale, Mr. Buchan said.

According to its executives, DealerTrack maintains lending information for dealers, which it updates daily. Dealers have access through the DealerTrack Web site to current rates and lending programs, payment calculators, product comparisons, and customer loan balances.

"This venture creates an exciting opportunity for three industry leaders in auto finance to join forces, leveraging their individual strengths to enhance the total package being offered to dealers," said Michael R. Barrington, chief executive officer of Fort Worth, Tex.-based AmeriCredit.

Mr. Buchan predicted DealerTrack would become profitable "very quickly."

Chase Auto Finance, a division of J.P. Morgan Chase & Co., is among the largest bank originators of auto loans and leases in the United States. Chase, which works through a network of 9,600 auto dealers, originates approximately $1 billion of auto loans and leases monthly, and has more than $24 billion of receivables in its auto finance portfolio.

AmeriCredit, the largest independent auto finance company in the United States, had an auto loan portfolio worth $8.2 billion at the end of 2000.

DealerTrack is talking to 10 regional banks about joining the network, Mr. Buchan said, and at least six of them will be on the system in the second quarter.

Paul Taylor, chief economist for the National Automobile Dealers Association in McLean, Va., said automating the lending process will allow DealerTrack's member banks to compete more effectively with the financing arms of manufacturing companies like GMAC and the credit arms of Ford and Chrysler. The automakers have had privileged status in financing because of their closeness to the point of sale, he said, and the price incentives they give customers for buying their products.

DealerTrack will put banks "in serious contention for a range of business with dealerships, and give them the same efficiencies that the financing arms of manufacturing companies have," he said. "It is important that [DealerTrack] is emulating the range of services and the efficiency of services coming from the financing arms of manufacturing companies. They've put some big players together, and a range of players that can met the needs of non-A-credit car buyers."

Nancy Bush, a senior vice president and bank analyst with Prudential Securities in New York, said that for years, banks have "forfeited the bulk of the auto lending market to the financing arms of manufacturing companies." These, she said, "lend much more advantageous rates because they want the customer to buy their car."

Ms. Bush said that DealerTrack "might allow banks to compete a little more effectively by pooling their resources in a business that no one can be significant in all by themselves." The added volume that automation will drive to banks, and lower operating costs from operating as a consortium, will make targeting auto loans more cost-effective for banks, she said.

DealerTrack will face another short-term challenge in that, lately, the auto leasing business - also being targeted by DealerTrack - has been a sore spot for some banks, said Ms. Bush. Once embraced as a reliable source of interest income and fee revenue, auto leasing has suffered recently from sharply declining used-car prices.

"The used car markets have been so soft because so much steel has been put on the roads and so many cars have been leased in the last few years," she said. "So many have come off-lease all at the same time that the residual values have just plummeted because there is so much supply."

Problems with auto leasing began about three years ago, and since then, the business has suffered from a drop in the value of residuals - the worth of a used car when the consumer's lease contract expires. Several factors have contributed to this, including the rising popularity of shorter-term lease contracts, which created more turnover and a glut of used cars on the market, and waning popularity for sports utility vehicles, a product segment that consumers financed heavily with leases.

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