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The local arm of US giant GE Money has further extended its tentacles into the New Zealand credit industry with a deal that will see it finance Dorchester Pacific's Senate used car loan business.
Dorchester Pacific yesterday said its subsidiary Senate would act as broker of used car loans through its existing network of dealers and customers, but GE Money would be the primary finance provider. Senate operates exclusively in the Auckland used car market where Christchurch-based Provincial Finance came to grief after expanding rapidly there.
While the market has cooled in the past year or two, Senate has a loan book of about $100 million and is writing 300 to 400 loans each month with an average value of $10,000. About $2.7 million of bad loans on Senate's loan book were written off last year leading to an operating loss for the subsidiary of about $1 million.
Dorchester chief executive Andrew Walker said yesterday's move was "in line with the strategic direction we signalled last year and confirmed at our recent annual general meeting to streamline our business and move away from consumer-related finance".
Under the new arrangement, which had been negotiated over the past nine months, Senate will retain its existing loan book but the majority of new lending will be funded by GE Money.
GE Money is the finance operation of General Electric, one of the world's largest companies. It has aggressively expanded in Australia and New Zealand in recent years and with its AAA credit rating it can access funds more cheaply than virtually all its rivals, including the major banks.
Walker said a strategic review of Dorchester's operations completed at the end of last year had led to the conclusion that "competing with the likes of GE, who have a lower cost of funds, in that marketplace head to head is strategically naive".
