Leases accounted for almost half of GM Financial originations in the United States and Canada in the quarter.
That’s a big increase for the GM captive finance company and part of an industry trend that carried leasing to new highs. Last week, Ford Motor Credit Co. also reported an increase in leasing during third quarter.
Captive finance companies and preferred lenders for the automakers dominate leasing, since most leases are supported by automaker incentives.
Automakers push leasing for several reasons: Lease customers are more loyal to the same brand and to the same dealership; they return more often for new vehicles; and lease incentives are less hurtful to brand image and used-car prices than cash incentives on new vehicles.
More than double
U.S. lease originations were $1.4 billion for GM Financial for the quarter, more than double the $577 million it recorded in the year-earlier quarter.
CEO Dan Berce said in a conference call last week that, “primarily because of our increase in lease share,” GM dealerships accounted for 65.5 percent of total GM Financial originations in North America, up from 56 percent a year earlier.
Leases accounted for 47 percent of North American originations for GM Financial, up from 36 percent a year ago. In Canada, lease penetration was even higher. Berce said leases were the “vast majority” of GM Financial originations in Canada. The company’s Canadian lease volume was $325 million in the third quarter, again more than double the year-earlier amount: $150 million.
GM Financial, of Fort Worth, Texas, is a relative newcomer to leasing. GM Financial is the former AmeriCredit, a specialist in subprime auto loans, which GM purchased in 2010 and renamed.
AmeriCredit did some leasing before the GM buyout, but it wasn’t offering leases at the time of the buyout. GM Financial started offering leases to GM dealerships in December 2010 and completed a nationwide rollout of leasing in July 2011.
Besides loans and leases for GM dealerships, GM Financial continues to offer subprime loans to non-GM dealers using the AmeriCredit brand name. That channel accounted for $905 million worth of loans in the third quarter, up 25 percent from a year ago.
Ford Credit’s gains
Meanwhile, Ford Credit reported separately last week that its worldwide net investment in operating leases was $20.9 billion for the third quarter, up 21 percent from a year ago. Outstanding consumer leases account for the majority of the category, which also includes leases to fleets.
The Ford captive doesn’t typically break out its retail lease originations quarter by quarter. In September, Ford Credit CEO Bernard Silverstone said in a presentation for analysts and media that Ford Credit lease penetration was “not quite” industry average.
According to Experian Automotive, industrywide leases accounted for 26 percent of U.S. retail volume in the second quarter -- the latest quarter for which detailed results were available -- up from 23 percent a year ago. That was the highest since Experian started publishing its data in 2006.
Lagging the industry
GM said last week that its U.S. lease penetration in the third quarter was 22 percent, up from 21 percent a year earlier. According to GM, lease penetration for the rest of the industry not counting GM was 26 percent in the third quarter, up from 24 percent a year ago.
Besides GM Financial, GM also offers leases through U.S. Bank and Ally Financial. GM Financial said last week it accounted for 33 percent of GM’s total U.S. lease volume, up from 17 percent a year earlier.
Lease penetration for the Detroit 3 automakers is below industry average in part because leasing is below average for pickups, a segment in which the domestic brands have the biggest share.