Ally Financial Inc.’s second-quarter auto lending originations declined just 1 percent from a year earlier to $10.8 billion, despite a sharp drop in lease originations for General Motors vehicles, the company said this week.
For the first time, GM made up less than half of Ally’s auto originations, Chris Halmy, Ally’s CFO, said during an earnings call on Tuesday.
GM lease originations plummeted 96 percent to $100 million, the company said.
Beginning in February, GM replaced Ally with its current in-house financing arm, General Motors Financial Co., for subsidized leases on Buick, GMC and Cadillac vehicles.
Ally said gains in its Chrysler channel and what it calls its growth channel, which is made up of its non-GM and Chrysler franchised dealer clients, drove the origination volume.
“These are clear proof-points that our business model and value proposition are winning across nameplates and throughout the marketplace,” Ally CEO Jeffrey Brown said in a statement.
Ally has added more than 900 dealers to its growth channel so far this year, Halmy said.
“This translates to an incremental flow of applications,” he said, “with similar approval rates.”
Growth channel originations made up 32 percent of total originations. Of all originations in the quarter, $5.9 billion were new retail, $4 billion were used retail, and $1 billion were leases.
Excluding GM leasing and subvented originations, consumer originations grew 36 percent from the year earlier. Growth channel dealer volume jumped 58 percent.
Ally has also continued to increase its non-prime loan originations.
“We make loans even in the non-prime space to customers we expect to pay back the loan,” Halmy said. “If people have jobs, they’re going to pay their auto loans.”
Auto finance results
Ally’s auto finance segment earned $401 million in pretax income for the second quarter, down 13 percent from the year earlier. Lower net financing revenue, because of lower lease revenue, drove the decline, the statement said.
But pretax income for Ally’s auto insurance segment surged. It swung to a gain of $15 million from a pretax loss of $23 million a year earlier.
The gain was driven by lower weather-related losses. Ally’s insurance offerings focus on “dealer-centric” products such as extended vehicle service contracts and dealer inventory insurance.
The company as a whole reported a better-than-expected quarterly profit as expenses declined.
Total non-interest expenses fell 12 percent to $724 million.
Easy availability of auto loans and cheap gasoline prices pushed U.S. auto sales in May to their strongest pace in a decade.
“Looking to the second half of the year, Ally remains on track to achieve its financial targets, and we will continue our efforts to explore additional products and services that would drive growth for the company and add value to our customers,” Brown said in the statement.
The company reported a net income of $182 million, compared with a year-ago profit of $323 million. Net financing revenue rose 1.6 percent to $927 million.
Reuters contributed to this report.