Why do you think used-car prices will stay high?
It's a combination of changes in OEM strategy, changes in quality and changes in customer demand and customer appeal. So even though the supply is increasing, prices should stay at a higher plateau.
If you go back to the downturn, dealers focused on used, and customers turned downmarket a bit. At the same time, trade-ins got older. I think [dealers] stay in that market. It's a higher margin for them and it drives good service business.
Ally has increased its used-vehicle deals.
We made that decision probably four years ago to do more used-car financing. Historically, as a captive, that was not a focus for us. It's an expansionary strategy. [Ally Financial evolved from GMAC Financial Services Inc., General Motors' former captive finance company. Ally is a GM preferred lender for some incentivized deals. Ally was a preferred lender for Chrysler Group until April.]
In your presentation, you said the increase in leasing is cutting into cash transactions, not loan deals.
Most of that is a cash buyer. There are several positive impacts from leasing. The consumer protects their cash and lowers their financial commitment. They're not having to manage the residual value. Somebody else takes that risk. At the same time, people are more willing to try new brands. Leasing is just a more robust model for those customers.
Leasing used to be synonymous with high incentives. Is that still true?
It's all degrees of magnitude. The deals require a certain level of subvention to reach the level for that price comparison to a loan.
You've got to have access to sufficient incentive money, for instance the GM and Chrysler models. That's less so on the Chrysler side now that they have Chrysler Capital.
But they're still offering what I think they call independent lease cash, which is dealer money that's available for any lessor. GM is pretty much a subvented product.
Do you have big initiatives for 2014? At the NADA convention in Orlando this year, Ally announced a lot of dealership initiatives, such as help with direct-mail campaigns.
Lead management, Performance Development Centers -- all the things we're doing for dealers at consumer touch points -- I think we're still immature. I think we still need some more product awareness among the dealers and awareness of the benefits of those programs. We do have more users on Performance Development Centers, and that's growing.