Lloyds TSB has defended its decision to launch an online car sales operation despite an apparent conflict of interest with existing subsidiary Black Horse, the UK's largest dealer-based motor finance business.

The new division, Motordirect, will target bank customers by offering "fleet level" discounts on 35 makes, including Alfa Romeo, Ford, Vauxhall and Volkswagen. Part of its sales pitch is reported to be no haggling and no pressure from salesmen.

Vehicles will be sourced through Lloyds TSB Autolease which already has 92,000 cars on contract. Autolease accredited dealers will handle customer fulfilment and be able to establish a relationship for service and maintenance work.

Mark Stokes, Lloyds TSB customer relationships director, said the new scheme was aimed "purely at the bank's existing 16m customers and there is no intention to go beyond that".

"This scheme is all about extending and protecting our reach in the existing customer base," he said. "A very large proportion of the personal loans we give are already for cars and that business is under attack. We are at least still feeding business back into the dealer network and there is a fair chance we will generate extra business from aftersales they might not otherwise have had."

Mr Stokes said most of the calls he had received about Motordirect had been from dealers wanting to become Autolease agents.

Other motor finance companies were quick to emphasise their commitment to working with dealer networks.

Gerard Ryan, GE Capital Woodchester managing director, said: "We have said publicly all along that we would not go into business directly against the dealers. We are set up to offer finance through dealers and view the dealers as our customers."

He said it "would be interesting" to see how Lloyds TSB and Black Horse manage their business with dealers in the future and predicted that might been some "disaffected" people.

Lloyds TSB is believed to have been working on the Motordirect scheme for more than a year. It is already on course to sell 3,500 cars this year, mainly to staff and some segments of its customer base who have been taking part in a pilot scheme.

"We will undertake a further review of the business after next March, but we are well on track with the pilot scheme," said Mr Stokes.

Cars will be funded through personal contact purchase or personal hire schemes, though Mr Stokes said the hire product would probably only appeal to ex-company car drivers. Motordirect is being promoted through the bank's website.