GM Financial tests prime-risk auto loans

Berce: Expanding GM Financial's lending footprint.
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GM Financial launched a pilot program for prime-risk auto loans in the first quarter as a prelude to more widespread prime-risk lending sometime this summer.

“We are currently testing prime system capabilities with some of our commercial floorplan dealers in two states and we expect to roll out a prime product offering to our commercial dealers nationwide in mid-2014,” COO Kyle Birch said in an e-mail today to Automotive News.

As of the first quarter, GM Financial said last week it had 336 dealers signed up for commercial lending, up from 155 a year earlier. As of Jan. 1, GM had 4,300 U.S. dealerships, according to the Automotive News Data Center.

GM Financial is the former AmeriCredit, a specialist in subprime auto loans which GM purchased in 2010. The company says the lack of prime-risk loans has made it hard to sign up dealers for floorplan and other commercial lending, since dealers prefer a full-service lender.

Subvention expands

The captive finance company also said last week that in the first quarter it began offering near-prime loans backed by incentives from parent General Motors alongside its subvented subprime loans.

“Heretofore we had only participated in GM’s subprime, or less than 620 credit subvention programs. So we have now begun near-prime as well,” GM Financial CEO Dan Berce said during the company’s conference call to review first quarter results.

GM Financial won’t say precisely how it defines the credit tiers. But parent GM says it defines the subprime category as credit scores below 620, reflecting the cutoff used by Experian Automotive. Experian defines nonprime loans as credit scores of 620 to 679.

GM Financial reported net income of $145 million in the first quarter, up about 37 percent from the year-earlier period. During that time span, GM Financial added most of the former International Operations of Ally Financial Inc.

In the United States and Canada combined, GM Financial said its consumer loan and lease originations were $2.1 billion, an increase of about 8 percent from a year ago. Almost the entire increase was in leasing for GM dealerships. With international operations, originations more than doubled to about $4.2 billion.

Meanwhile, Ford Motor Credit Co. also reported first-quarter results last week. Ford Credit had net income of $312 million for the quarter, down from $364 million in the year-earlier period.

Ford Credit declines

Ford Credit blamed most of the decline on the absence of favorable returns on lease residual values compared with the same quarter a year ago. The company said the average 24-month lease return was worth $18,965 at auction in the first quarter, down about $600 from the 2013 quarter.

In the first quarter, Ford Credit said it had 60,000 lease returns, more than double the level of a year ago. The higher number of returns should benefit dealerships looking to stock late-model used cars.

GM Financial and Ford Credit reported their quarterly results on April 24 and April 25, respectively. Captive finance companies for the import brands don’t routinely report their U.S. results with as much detail.

You can reach Jim Henry at autonews@crain.com.

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