Ally Financial Inc. is doing more leasing, more used-vehicle loans and more loans to dealerships with brands other than those of General Motors and Chrysler, all in line with a strategy it previously laid out.
"We continue to diversify our originations away from GM and Chrysler," CEO Michael Carpenter said during the company's conference call last week discussing first-quarter earnings.
He said dealerships with brands other than GM's and Chrysler's accounted for 19 percent of Ally's originations in the first quarter, an increase of 40 percent from the year-earlier period.
Ally's total originations fell 5 percent in the first quarter to $9.2 billion, in part because of drops in Chrysler business and in subvented new-vehicle loans for GM. Carpenter said Ally has held back from boosting volume by buying riskier loans.
Ally Financial evolved from GMAC, GM's former captive finance company. Ally became a bank in late 2008 and emerged as the preferred lender for GM and Chrysler following the automakers' bankruptcy restructurings in 2009.
Ally's agreement with Chrysler for access to Chrysler incentives expired in April 2013. Ally still has a relationship with GM that enables it to share in GM incentive programs alongside other lenders.
In the first quarter, Chrysler new-vehicle financing, including loans and leases, accounted for 10.5 percent of the dollar volume of Ally's U.S. consumer originations, down from 21.2 percent in the year-earlier period.
GM new-vehicle originations accounted for 51.3 percent of Ally's U.S. consumer originations, up from 48 percent a year ago. GM leases were $2.3 billion in the quarter, up from $1.9 billion in the 2013 period, the company said.
Used-vehicle loans for all brands accounted for 30 percent of the total, up from 25 percent.
On the leasing side, CFO Chris Halmy said Ally is making money on remarketing off-lease vehicles. Other auto lenders have reported a similar experience -- the result of relatively conservative estimates for residual values at the time the leases were made combined with higher-than-expected used-car prices today.
Halmy said in the conference call that the company expects the benefit from remarketing to decline somewhat as 2014 progresses and relatively high used-car prices moderate. In the first quarter, Ally had a gain of $109 million on remarketing, up from $64 million in the year-earlier period.
"We are realizing better-than-expected results on our lease book given an increase in vehicle turn-ins at a time of continued strong used-car prices. And while volumes have continued strong through the first quarter, this is something we expect to see moderate throughout the year," Halmy said.
Tom Kontos, chief economist for ADESA Analytical Services, said separately he's surprised that used-car prices have remained high despite greater volumes of off-lease vehicles. He said that's probably because the increase in off-lease units has been gradual.
Dealerships still need late-model used cars to make up for shortages created when new-car production dropped during the downturn, Kontos said. Eventually, he said, he expects used-car values to normalize.
Said Kontos: "It's a little early to say that there's a new normal that means an increase in supply does not have the effect on prices as it would normally."
You can reach Jim Henry at firstname.lastname@example.org