<PAGE>

                                                                   EXHIBIT 10.40

                               SERVICES AGREEMENT

      This Services Agreement (the "Services Agreement") is made and entered
into as of January 1, 2004 by and between Western Financial Associate Solutions,
a California corporation ("WFAS"), on the one hand and Western Financial Bank, a
federally chartered institution and WFS Financial Inc, a California corporation
(collectively the "Companies"), on the other.

                                    RECITALS

      WHEREAS, WFAS is engaged in the employee leasing business, which consists
of providing the services of persons employed by it to the Companies pursuant to
extended term contractual arrangements; and

      WHEREAS, WFS Financial Inc is a direct first tier subsidiary of Western
Financial Bank; and

      WHEREAS, the Companies desires to obtain the services of employees of WFAS
to perform certain of the business functions of business units of the Companies
on the terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto agree as follows:

                                    AGREEMENT

      1. PROVISION OF SERVICES.

      1.1 WFAS hereby agrees to provide to the Companies the services of such
employees of WFAS as the Companies shall from time to time request on the terms
and subject to the conditions set forth in this Services Agreement. The names of
the employees of WFAS initially requested by the Companies, and the respective
business units of the Companies for which such employees of WFAS will perform
services pursuant to this Services Agreement, are set forth in the schedule
attached as Exhibit A hereto. The Companies may request the services of
additional employees of WFAS, change the job assignments of any WFAS employees
made available to the Companies or instruct WFAS to terminate the assignment of
any WFAS employee who has been providing services to the Companies, at any time
upon written notice to WFAS. WFAS shall maintain complete and accurate records
of all of its employees who are requested from time to time to perform services
for the Companies pursuant to this Services Agreement, including without
limitation the names of such employees, the business units of the Companies for
which such employees perform services and the dates of commencement and
termination of the provision of such services by such employees. WFAS shall
supply a complete list of all such employees to the Companies and to any
regulatory authorities having jurisdiction over or responsibility for the
Companies promptly upon request by the Companies. In addition, WFAS may request
the Companies to acknowledge and confirm, on reasonable notice, the accuracy of
any such list that WFAS may prepare for its own business purposes.

<PAGE>

      1.2 In any request for services of employees of WFAS that the Companies
shall make from time to time, the Companies may specify the compensation or
range of compensation and the terms of compensation that the Companies
anticipate will be required to be paid to obtain the services of such employees,
or the Companies may request that WFAS provide advance notification to the
Companies of the compensation or range of compensation and the terms of
compensation that WFAS believes will be so required. In addition, the Companies
may from time to time give reports and recommendations to WFAS regarding the
performance of, and appropriate levels of bonus or incentive compensation to be
paid to, employees of WFAS in respect of the services of such employees to the
Companies.

      1.3 Concurrently with the execution and delivery of this Services
Agreement by the parties hereto, the respective Companies are transferring to
WFAS all of the human resource functions of the Companies and related
administrative functions that have heretofore been conducted by the Human
Performance Department of the Companies with the intention and for the purpose
of outsourcing all of such functions to WFAS. Accordingly, in addition to
providing the services of certain of its employees as provided in Section 1.1
above, WFAS hereby agrees to provide all of the human resource functions and
related services indicated in the schedule attached as Exhibit B to this
Services Agreement to the Companies with respect to those persons performing
services for the Companies who are employed directly by the Companies and are
not employees of WFAS. The provision of such human resource and related services
pursuant to this Section 1.3, together with the provision of the services of
employees of WFAS pursuant to Section 1.1 above, are herein collectively
referred to as the "Services."

      1.4 WFAS hereby agrees to be responsible and held accountable for the
property and equipment of the Companies that are used by the employees of WFAS
in the performance of their duties and obligations hereunder. As such, the
employees of WFAS will have day to day operational control over the property and
equipment related to the essential operation of the Companies' facilities in
which they are employed, but subject at all times to the policies and overall
supervision of the Companies' Boards of Directors and executive officers.

      2. COMPENSATION AND PAYMENT.

      2.1 In consideration for the Services provided by WFAS under this Services
Agreement, the Companies will pay a monthly fee to WFAS equal to WFAS' costs in
providing the services of such requested employees during that month plus a
margin of five percent (5%) of such total costs. The costs included in such fee
shall include, without limitation, all wages, salaries, bonuses, payments for
overtime and other compensation earned by and the costs of providing all
benefits to the employees of WFAS who provide services to the Companies under
this Services Agreement, and any taxes or governmental charges relating to such
services. The services to be provided by WFAS are included in Exhibit B
attached. The amount and structure of such fee has been determined in accordance
with the transfer pricing survey prepared by Ernst & Young, LLP dated October
14, 2003. Either party hereto may request that a new transfer pricing survey be
prepared by Ernst & Young, LLP or such other qualified firm as the parties may
select at any time after 30 days notice to the other party hereto and may, on
the basis of such new transfer pricing survey, propose such changes in the
compensation provided for in this Services Agreement as such party shall deem
appropriate. In the event of any such proposal, the

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parties hereto shall negotiate in good faith for a period of up to 30 days to
arrive at an agreement regarding such compensation. If such agreement is not
reached, either party may thereafter exercise the termination rights provided in
Section 6 below.

      2.2 WFAS will provide monthly notices acceptable to each of the Companies
(which may be on an other than monthly basis if agreed to by the Companies) of
the amounts owed for all Services provided by WFAS, setting forth the amount of
the fees to be paid for such Services, together with such supporting information
relating thereto as the Companies may request. Payment or other provision
acceptable to WFAS shall be made by the Companies 30 days in advance based on an
estimate of amounts owed. Any differences will be reconciled within 15 days of
the monthly notice. In the event any such amount is disputed, the Companies
shall make payment or other provision acceptable to WFAS of the portion thereof
that is not disputed within such 30-day period and the parties hereto shall
negotiate in good faith to resolve any such disputed amount as soon as possible
thereafter. All payments shall be made to WFAS at the address listed in Section
8.6 below or such other place, by wire transfer to such account, or by such
other method, as WFAS may designate.

      3. INTELLECTUAL PROPERTY RIGHTS.

      As between the parties hereto, each shall retain all rights to and
interest in any and all trademarks, tradenames, copyrights, patents, other
intellectual property and related protectable rights, and all proprietary or
Confidential Information (as defined herein) and know-how associated with its
own products, services and business and their design, use, sale and distribution
(collectively, the "Intellectual Property") which it may have or may have
acquired under license or otherwise, and each party shall have the right to use
the same only in the conduct of its activities in connection with which Services
are provided pursuant to this Services Agreement. No other right to or license
of any Intellectual Property is granted by either party to the other by this
Services Agreement, and neither party shall have the right, except as may
hereafter be granted by the other party from time to time in writing, to
register or attempt to register, or to assert any legal entitlement to or
ownership of any of the Intellectual Property of the other.

      4. CONFIDENTIAL INFORMATION.

      Notwithstanding any other provision of this Services Agreement, the
parties hereto agree to maintain in confidence, and not to disclose to any third
party, during the term of this Services Agreement any Confidential Information
furnished by one party to the other. As used in this Services Agreement, the
"Confidential Information" of a party (the "Disclosing Party") shall mean and
include the Intellectual Property and any information of any nature, whether or
not specifically so designated, except for information (i) which at the time of
disclosure is, or subsequently becomes, part of the public domain through no
fault of the other party (the "Receiving Party"); (ii) which at the time of
disclosure is already known to the Receiving Party or (iii) which is
subsequently disclosed on a non-confidential basis to the Receiving Party by a
third party whose receipt and disclosure does not constitute a violation of any
confidentiality obligation to such party. Confidential Information may include,
but shall not be limited to, processes, computer programs, software, systems,
compilations of information, records,

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specifications, cost and pricing information, customer lists, customer
information. Each party hereto shall take all reasonable steps to protect the
Confidential Information of the other party hereto from unauthorized disclosure.
The Receiving Party further agrees not to use any Confidential Information in
any way, directly or indirectly, except as required in the course of the
performance of the terms of this Services Agreement and approved by the
Disclosing Party.

      5. COMPLIANCE WITH LAWS AND REGULATIONS; THE COMPANIES SUPERVISION OF
EMPLOYEES.

      5.1 Each party shall at all times and at its own expense (i) strictly
comply with all applicable laws, rules, regulations and governmental orders, now
or hereafter in effect, relating to its performance of this Services Agreement,
(ii) pay all fees and other charges required by such laws, rules, regulations
and orders and (iii) maintain in full force and effect all licenses, permits,
authorizations, registrations and qualifications from all applicable
governmental departments and agencies necessary to perform its obligations
hereunder.

      5.2 WFAS acknowledges and agrees that each of its employees who provide
services to the Companies pursuant to this Services Agreement will be deemed an
"Institution-Affiliated Party" as that term is defined in Section 3(u) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1813(u)) and agrees to notify
such employees of their status as such. WFAS further agrees that it will comply,
and that it will assist the Companies in complying, with all rules, regulations,
policies and bulletins governing employees and officers of federally insured
financial institutions that are imposed or promulgated from time to time by
either the Federal Deposit Insurance Corporation or the Office of Thrift
Supervision, including, without limitation, the enforcement provisions set forth
in Section 8 of the Federal Deposit Insurance Act (12 U.S.C. Section1818).

      5.3 WFAS agrees to provide the Federal Deposit Insurance Corporation and
the Office of Thrift Supervision with all such access to the employment and
other records of WFAS concerning the Companies, the respective subsidiaries and
affiliates of the Companies, their respective employees and each of the
employees of WFAS who perform services for any of the foregoing as the Companies
are required to provide to the Federal Deposit Insurance Corporation and the
Office of Thrift Supervision with respect to employees of the Companies.

      5.4 WFAS and each of the Companies acknowledge and agree that the board of
directors of the respective Companies shall be responsible for oversight of the
use of employees of WFAS by the Companies provided for in this Services
Agreement and for assuring that effective policies and procedures are adopted
and implemented to comply with all applicable rules, regulations, policies and
bulletins of the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision. WFAS and the Companies agree that the Companies shall have control
over the performance by the employees of WFAS who provide services to the
Companies pursuant to this Services of their duties and assigned
responsibilities in connection with operating the Companies and its
subsidiaries. Without limiting the generality of the foregoing, (i) WFAS shall
instruct its employees who are designated to perform services for the Companies
pursuant to this Services Agreement that such employees are obligated to follow
the business policies of, and to conform to the regulations applicable to, the
Companies; and (ii) the Companies shall have the right at any time to instruct
WFAS that the services to the Companies

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of any employee of WFAS shall be terminated, whether for reasons of change in
the business of the Companies, failure of such WFAS employee to conform to the
policies of the Companies, breach of applicable law or regulation or otherwise.

      6. TERM AND TERMINATION.

      6.1 This Services Agreement shall be effective as of the day and year
first set forth above and shall continue in effect until terminated by either
party as provided herein.

      6.2 This Services Agreement may be terminated at any time by the mutual
consent of the parties evidenced by an agreement in writing signed by all
parties, and either party may terminate this Services Agreement on 30 days
written notice to the other party. Either party may terminate this Services
Agreement immediately (i) in the event a material breach of any term of this
Services Agreement by the other party shall continue uncured for a period of 30
days after notice thereof is given in writing by the non-breaching party to the
breaching party; (ii) upon a breach by the other party of the provisions of
Sections 4 or 5 hereof; (iii) upon the other party's insolvency; or (iv) upon
the other filing of a voluntary or involuntary petition in bankruptcy,
assignment for the benefit of creditors, or any comparable event or proceeding
under the laws of the jurisdiction in which the other party is located.

      6.3 Upon termination of this Services Agreement, each party shall
immediately cease using all Intellectual Property of the other, cease all
activities pursuant to this Services Agreement and, at the option of the other
party, return or destroy all Intellectual Property having tangible form in its
possession, custody or control which belongs to or which was received from the
other party.

      7. INDEMNITY.

      Each party agrees to indemnify, defend and hold harmless the other party
and the other party's shareholders, directors, officers and affiliates from and
against any and all liability, loss, damage, costs and expenses, including
attorneys' fees and costs, arising from the first party's negligence, willful
misconduct or breach of any provision of this Services Agreement, claims of any
kind made by employees of the first party (including, without limitation, claims
relating to alleged wrongful termination, discrimination, sexual harassment or
workplace injury) or infringement by the first party or its employees of any
third party's proprietary rights or intellectual property in connection with the
performance of the Services. WFAS shall at all times carry and maintain a policy
or policies of insurance of a type and in amounts reasonably necessary to
protect it from third party claims and, to the extent necessary to satisfy its
indemnification obligations to each of the Companies hereunder, and hereby
assigns its rights under such policies of insurance to the Companies.

      8. Covenants regarding Corporate Existence.

      8.1 Preservation of Corporate Existence and Qualifications. Each party to
this Services Agreement will keep in full effect its existence, rights and
franchises as a corporation

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under the laws of the State of California and will obtain and preserve its
qualifications to carry on business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary.

      8.2 Observation of Corporate Formalities. Each party to this Services
Agreement shall at all times observe the applicable legal requirements for the
recognition of such party as a corporate entity separate and apart from the
other parties to this Services Agreement, including without limitation the
following:

            (i) Each party shall maintain corporate records and books of account
separate from those of the other parties;

            (ii) No party shall at any time commingle its funds with those of
the other parties;

            (iii) Each party shall hold meetings of its board of directors as
appropriate to authorize its corporate actions;

            (iv) Each party shall hold meetings of its shareholder(s) as
appropriate and as required by the California Corporations Code to authorize its
corporate actions;

            (v) Each party shall file all reports required by the California
Secretary of State, including the yearly Statement By Domestic Stock
Corporation, in a timely manner; and

            (vi) Each party shall ensure that its yearly franchise taxes are
paid in a timely manner so as to maintain its corporate existence uninterrupted.

      8. MISCELLANEOUS PROVISIONS.

      8.1 RELATIONSHIP OF THE PARTIES. No party hereto is an agent or
representative of the other, and no party shall be liable for or bound by any
representation, act or omission of the other party. This Services Agreement
shall not constitute the parties hereto partners or joint venturers and is being
entered into solely for the administrative convenience of both parties. This
Services Agreement is not for the benefit of any third party and no person other
than WFAS and the Companies shall have any right to seek enforcement of the
provisions hereof or damages premised on failure to comply with any of the terms
hereof.

      8.2 SEVERABILITY. If any provision of this Services Agreement shall be
held unenforceable, either by operation of law or otherwise, the remainder of
this Services Agreement shall nevertheless remain in full force and effect, it
being the intent and agreement of the parties that this Services Agreement will
be deemed to have been amended by modifying such provision to the extent
necessary to render it valid, legal and enforceable while preserving its intent
or, if such modification is not possible, by substituting therefor another
provision that is legal and enforceable and that achieves the same objective.

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      8.3 NO WAIVER. No express or implied waiver by any party of any provision
of this Services Agreement or of any breach or default of the other party shall
constitute a continuing waiver, and no waiver by any party shall prevent such
party from enforcing any and all other provisions of this Services Agreement or
from acting upon such other provisions or upon any other or subsequent breach or
default by the other party.

      8.4 FORCE MAJEURE. If the performance of any part of this Services
Agreement by either party, or of any obligation under this Services Agreement,
is prevented, restricted, interfered with, or delayed by reason of any cause
beyond the reasonable control of the party liable to perform the same, the party
so affected shall, on giving written notice to the other party, be excused from
such performance to the extent of such prevention, restriction, interference or
delay, provided that the affected party shall use its reasonable best efforts to
avoid or remove such causes of nonperformance and shall continue performance
with the utmost dispatch whenever such causes are removed. When such
circumstances arise, the parties shall discuss what, if any, modification of the
terms of this Services Agreement may be required in order to arrive at an
equitable solution.

      8.5 SUCCESSORS AND ASSIGNS. This Services Agreement shall be binding on
and shall inure to the benefit of the parties, their Affiliates, their
respective successors, successors in title, and assigns, and each party agrees,
on behalf of it, its Affiliates, successors, successors in title and assigns, to
execute any instruments that may be necessary or appropriate to carry out and
execute the purpose and intentions of this Services Agreement and hereby
authorizes and directs its Affiliates, successors, successors in title and
assigns to execute any and all such instruments. Each and every successor in
interest to any party or Affiliate, whether such successor acquires such
interest by way of gift, devise, assignment, purchase, conveyance, pledge,
hypothecation, foreclosure, or by any other method, shall hold such interest
subject to all of the terms and provisions of this Services Agreement. The
rights of the parties, their Affiliates and their successors in interest, as
among themselves, shall be governed by the terms of this Services Agreement, and
the right of any party, Affiliate or successor in interest to assign, sell or
otherwise transfer or deal with its interests under this Services Agreement
shall be subject to the limitations and restrictions of this Services Agreement.
As used in this Services Agreement, the term "Affiliate" or "Affiliates" shall
mean any corporation, firm, partnership or other entity, whether de jure or de
facto, that directly or indirectly owns, is owned by, or is under common
ownership with a party to this Services Agreement to the extent of at least 50
percent of the equity having the power to vote on or direct the affairs of the
entity and any person, firm, partnership, corporation or other entity actually
controlled by, controlling, or under common control with a party to this
Services Agreement.

      8.6 NOTICES. All notices, demands, requests, consents, statements,
satisfactions, waivers, designations, refusals, confirmations, denials and other
communications that may be required or otherwise provided for or contemplated
hereunder shall be in writing and shall be deemed to be properly given and
received (i) upon delivery, if delivered in person or by facsimile transmission
with receipt acknowledged, (ii) one business day after having been deposited for
overnight delivery with Federal Express or another comparable overnight courier
service, or (iii) three (3) business days after having been deposited in any
post office or mail

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depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, addressed as follows:

If to WFAS:                                 If to Western Financial Bank:

Western Financial Associate Solutions       Western Financial Bank.
23 Pasteur                                  15750 Alton Parkway
Irvine, CA 92618                            Irvine, CA 92618
Attention: Karen Marchak                    Attention: Manisha Merchant

If to WFS Financial Inc:
23 Pasteur
Irvine, CA 92618
Attention: Guy Du Bose

or such other person or persons at such address or addresses as may be
designated by written notice to the other parties hereunder.

      8.7 TRANSFERABILITY. Neither WFAS nor either of the Companies may transfer
any rights or obligations under this Services Agreement to any other party,
whether by sale, operation of law, pledge, assignment or otherwise, without
obtaining the prior written consent of the other party hereto.

      8.8 SURVIVAL. All terms and provisions of this Services Agreement intended
to be observed and performed after the expiration or termination of this
Services Agreement, shall survive such expiration or termination, and shall
continue in full force and effect.

      8.9 AMENDMENTS. No change, modification or amendment of this Services
Agreement shall be valid or binding on the parties unless such change or
modification shall be in writing signed by the party or parties against whom the
same is sought to be enforced.

      8.10 FURTHER Assurances. Each party hereby covenants and agrees that it
shall execute and deliver such deeds and other documents as may be required to
implement any of the provisions of this Services Agreement.

      8.11 COUNTERPARTS. This Services Agreement may be executed in multiple
copies, each of which shall for all purposes constitute one and the same
agreement, binding on the parties, and each party hereby covenants and agrees to
execute all such duplicates or replacement counterparts of this Services
Agreement as may be requested by either party hereto.

      8.12 COSTS AND EXPENSES. Unless otherwise provided in this Services
Agreement, each party shall bear all fees and expenses required to be paid in
connection with this Services Agreement or its performance hereunder.

      8.13 TITLE AND CAPTIONS. Section titles or captions contained in this
Services Agreement are inserted only as a matter of convenience and for
reference purposes and in no

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way define, limit, extend or describe the scope of this Services Agreement or
the intent of any provisions thereof.

      8.14 GOVERNING LAWS. This Services Agreement shall be deemed made in, and
governed by, the internal laws of the State of California, not including the
conflicts of laws provisions and principles thereof, and in the event of a
dispute, each Party hereby consents to the jurisdiction of the appropriate
courts of the State of California to resolve such dispute.

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      IN WITNESS WHEREOF, the parties have caused this Services Agreement to be
executed by their duly authorized representatives.

                                      WESTERN FINANCIAL ASSOCIATE SOLUTIONS

                                      By:______________________________________
                                         Name:
                                         Title:

                                      WESTERN FINANCIAL BANK

                                      By:______________________________________
                                      Name:
                                      Title:

                                      WFS FINANCIAL INC

                                      By:______________________________________
                                         Name:
                                         Title:

<PAGE>

                                   EXHIBIT "A"

                                       A-1
<PAGE>

                     EXHIBIT "B" HUMAN PERFORMANCE FUNCTIONS
                               TO BE PERFORMED BY
                                     (WFAS)

PAYROLL

      -     Pay all employees semi-monthly through paycheck or direct deposit

      -     Remit federal and state payroll taxes each pay period

      -     File monthly, quarterly and annual payroll tax returns for federal,
            state and local entities

      -     File unemployment tax returns for all government agencies

      -     Provide annual Internal Revenue Service Form W-2 wage and tax
            statements

      -     Provide payroll accounting information

      -     Arrange for annual workers' compensation audit

      -     Provide paid time off benefits (vacation, sick, other)

      -     Provide accounting information for all activities listed above

HUMAN PERFORMANCE MANAGEMENT SERVICES

      -     Provide systems support for payroll, benefits, personnel,
            recruiting, reporting and compensation

      -     Provide equal employment opportunity reporting

      -     Employee Relations: employee and manager counseling, problem and
            dispute resolution, responding to charges/claims from agencies and
            outside counsel, ensuring human resources' compliance with OTS
            regulations as applicable and tracking employee compliance.

      -     Training and Development: providing classroom and individual
            education opportunities to all levels of employees, performance
            management and ensuring compliance with mandatory training.

      -     Employee Retention: identify best practices and opportunities for
            improvement that influence retention and turnover, identify
            opportunities for improvements in human resources practices that
            result in efficiencies and enhanced support to internal customers

      -     Provide employees with medical, dental, vision, life, and short-term
            and long-term disability plan administration

      -     Provide non-qualified deferred compensation plan administration

      -     Provide 401k and ESOP plan benefits

      -     Provide Flexible Spending Plan benefits

      -     Provide COBRA administration

      -     Provide tuition reimbursement

      -     Provide employee assistance program (EAP) administration

      -     Provide leave benefits

      -     Provide workers' compensation benefits

      -     Develop and administer market competitive, legally compliant base
            and variable pay programs

      -     Assess, streamline, and develop ways to improve company efficiencies
            through automation and programming

                                       B-1
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      -     Provide all recruitment functions, including sourcing, screening,
            and placement of qualified candidates.

      -     Recruitment activities include: active and passive sourcing methods,
            background checks (i.e., criminal, Department of Motor Vehicles,
            credit and education), reference checking, interviewing, testing and
            new hire administrative processing.

REGULATORY REPORTING RESPONSIBILITY

      -     Gramm-Leach-Bliley Act

      -     Bank Privacy Act

      -     Workers' Compensation/Fair Labor Standards Act HIPAA Privacy Act

      -     Equal Employment Opportunity

      -     Applicable state laws

                                       B-2