UPDATE 1-Chrysler and Santander join forces in auto financing

Feb 6 (Reuters) - Chrysler Group LLC agreed to make Banco Santander's U.S. arm its preferred lender for auto loans on Wednesday, a deal aimed at broadening the financing it can offer its buyers and dealers.

Chrysler Capital, to be created under a 10-year deal due to launch on May 1, will include financing for customers with lower credit scores and subprime borrowers. It will also offer financing for dealers who want to spiff up their showrooms.

The agreement is expected to help Spain's largest bank gain visibility in the United States ahead of plans to float its Dallas-based consumer finance business -- Santander Consumer USA -- in the second or third quarter.

Chrysler, based in suburban Detroit, is majority owned by Italy's Fiat SpA. It said its dealers and customers will continue to work with the automaker's current preferred auto lender, Ally Financial Inc, at least through the end of their contact, which expires April 30.

Chrysler also said it expects to continue to work with Ally beyond the end of April, as well as with other financial institutions.

Santander declined to comment on the value of the deal.