General Motors' move to steer all subvented leases for Cadillac and Buick-GMC through GM Financial as part of the captive's ongoing buildup was welcome news for dealers, Cadillac dealer Howard Drake says.
The absence of a true captive finance company has been a competitive handicap for GM dealers, especially in leasing, said Drake, co-chairman of the Cadillac National Dealer Council and owner of Casa de Cadillac in Sherman Oaks, Calif.
"It was the first thing and the last thing we heard from the dealers at every meeting," he told Automotive News.
On balance, Drake said, dealers had been "very, very happy" with General Motors' former captive, GMAC, which was already semi-independent at the time of GM's bankruptcy restructuring in 2009. GMAC was later renamed Ally Financial Inc., but GM retained a minority share until December 2013.
In 2010 GM bought auto subprime lender AmeriCredit and revamped it into GM Financial in part to create an in-house finance source for leases. Since then, GM Financial has also added commercial lending for dealers and prime-risk loans.
Drake said dealers have complained that, compared with other makers' captives, outside lenders weren't as aggressive about leasing. He also said that with outside lenders, it's more difficult to coordinate lease pull-ahead programs aimed at getting customers out of their leases early and into a new vehicle.
GM's plans to steer all Buick-GMC and Cadillac lease incentives to GM Financial means that Ally and U.S. Bank will no longer share in those programs. The Buick and GMC lease subsidies will move to GM Financial on Feb. 3 and the Cadillac lease subsidies sometime in March. In letters to dealers, GM said it was making the change in response to dealer feedback.
Drake, who co-chairs a GM Financial dealer council, said dealers expect lease incentives for Chevrolet eventually to go the same way.
"I think because Chevrolet is so much more volume, somewhere in the midterm future we'll see Chevrolet," he said. "They just want to make sure GM Financial can handle the volume."
Ally's financial report for the third quarter of 2014 shows it financed 29 percent of GM's U.S. new-vehicle volume in the first nine months of 2014, including loans and leases, equal to what it financed a year earlier.
Drake said he expects that Ally will make changes to sales targets for its Ally Dealer Rewards program to avoid penalizing dealers for fewer leases through Ally.
In an email, Ally spokeswoman Gina Proia wrote: "We understand that the landscape is changing in the GM channel, and you can anticipate that we will evolve the ADR program to ensure it remains compelling for dealers that are committed to doing business with Ally."