Ally Financial Inc. says summer incentive programs at General Motors boosted the lender’s volume of subvented new-car loans by $800 million in the third quarter.
The programs were counter to a trend at Ally away from manufacturer incentives. Still, Ally embraced their success.
“I think that speaks to our capability,” said Jeffrey Brown, CEO of Ally Dealer Financial Services, during an Oct. 29 conference call for investors. “When the manufacturers want to put a big program out and in place, we can do it.”
Ally has been shifting away from manufacturer incentives for the past few years as GM and Chrysler have phased out the exclusive nature of their preferred-lender partnerships with the lender.
Ally has had no subvented business from Chrysler for several quarters. Santander Consumer USA provides private-label, preferred-lender services to Chrysler Group dealers via Chrysler Capital. Chrysler Capital has been on the receiving end of Chrysler Group incentives since May 2013.
Ally’s relationship with GM has endured, but GM spreads its preferred-lender business among several lenders. On average, GM’s incentivized business with Ally has been at lower volumes.
Ally’s subvented new-vehicle loan volume with GM was $1.8 billion in the third quarter, up from $1 billion a year ago. GM’s incentivized business accounted for 15 percent of Ally third-quarter originations, up from 11 percent a year ago.
Through September, Ally’s subvented GM new-vehicle loan volume was about $3.5 billion, down from $3.6 billion in the same period last year.
Ally said having a larger mix of subvented loans typically comes with the side benefit of experiencing fewer delinquencies and defaults.
Incentive programs “tend to attract a higher credit quality customer,” Ally CFO Chris Halmy said. “So our book is skewing a little bit toward the higher credit quality, which will bring losses from a percentage basis really down.”