Ally Financial remains bullish about both auto loan demand and the company's ability to raise the interest rates offered to car buyers despite high inflation and the prospect of more Fed rate increases.
"The story remains consistent," CEO Jeffrey Brown said on an earnings call July 19.
Vehicle demand was strong and supply challenged, Brown said. Consumers earning more than $50,000, the demographic representing the majority of Ally's portfolio, showed strong demand, Chief Financial Officer Jennifer LaClair said on the call. Ally still projected 4 million to 5 million consumers were poised on the sidelines to replace shoppers who dropped out of the market, Brown said.
Brown and LaClair's assessment came a week before the Federal Open Market Committee on July 27 raised the federal funds rate by 0.75 percentage points to a target of 2.25 to 2.5 percent. The Federal Reserve rate has a ripple effect upon consumer interest rates and spending.
In the second quarter, the Fed raised its rate a combined 1.25 points to a 1.5 to 1.75 percent target rate, as of June 15. The body sought to fight inflation, which ran 9.1 percent in June.
But Ally, which Experian's 2021 data ranks as one of the nation's largest new-vehicle (No. 9) and used-vehicle (No. 2) lenders, said it wrote more loans and leases in the second quarter than in the first three months of 2022, both in total dollars financed and the number of transactions handled. LaClair said 69 percent of the vehicles were used.
Ally also financed a larger amount of new debt than in the second quarter of 2021, though loan and lease application volume fell 6.6 percent from a year earlier. However, Brown said new auto sales were down 21 percent and used sales down 17 percent from a year earlier.