GM Financial ups GM new-car financing
GM Financial is expanding its new-car loan and lease business with General Motors dealers. But non-GM dealers selling mostly used cars still account for more than 50 percent of originations, the lender says.
CEO Dan Berce says that in spite of growing competition in subprime, GM Financial has been able to boost non-GM loan volume without having to cut interest rates or compromise on other metrics such as loan-to-value ratios or credit scores.
That’s partly because GM Financial’s own borrowing costs are at record lows and partly because of consumer demand, he says.
“Away from our new GM vehicle financing business, we continue to see growing but rational competition,” he says.
However, there’s no missing the fact that new-vehicle financing for parent company GM and its dealers accounts for a rising share of GM Financial’s business. With a higher mix of better-qualified customers, GM Financial’s loan losses were 2.5 percent for the third quarter 2012, down from 3 percent a year ago.
In the third quarter, GM new-vehicle loans and leases made up 43.5 percent of GM Financial’s originations, up from 39.3 percent a year earlier. By contrast, in the 2010 quarter, GM Financial’s predecessor company, subprime lender AmeriCredit Corp., had only 15.7 percent of originations from GM new-vehicle loans and none from leases.
While GM Financial has diversified its business into new cars and leasing, Berce says the company does not intend to respond to competition at the top end of subprime by pursuing more volume with the riskiest borrowers.
“If you go much deeper, you start having debt-to-income type of concerns,” Berce says. “Historically, that hasn’t worked out that well when things turn.”
You can reach Jim Henry at email@example.com.