GM Financial's loan originations dipped in the third quarter as General Motors adjusted its incentive strategy, the captive said Tuesday. Despite the dip in originations, net income rose 17 percent to $516 million during the latest period.
Retail loan originations fell 19 percent to $5.4 billion, while lease originations increased 7.6 percent to $5.8 billion, GM Financial said in a statement.
GM's third-quarter incentives averaged $4,349 a vehicle, up 7.8 percent, according to Edmunds. But there are various types of incentives. Some incentives are geared toward the transaction price, such as a rebate or cash, and others are focused on the financing, such as subvented finance rates or down payment assistance. In the third quarter, most of GM's incentives related to the transaction price, GM Financial CEO Dan Berce said.
"The prior quarters, when our penetration was higher, had more finance-related incentives than we saw in the third quarter," Berce told Automotive News. "They want to have different offers in the market at different times, so they are constantly changing [the] mix of incentives. The intention would be to go back to finance-related incentives later in the year and into next year."
In the third quarter, GM's U.S. sales rose 6 percent to 739,000 cars and light trucks.
Still, in October, the captive distributed a $400 million annual dividend to GM. Last year, GM Financial paid a $375 million dividend to its parent for the first time. Once GM Financial consistently finances 50 percent of GM’s U.S. retail sales, it will return a cash dividend to GM annually.
Still, in October, the captive distributed a $400 million annual dividend to GM. Last year, GM Financial paid a $375 million dividend to its parent for the first time. It will continue to return a cash dividend to GM annually until it consistently holds 50 percent of GM retail sales penetration in the U.S. and the captive's balance sheet growth levels off.
Third-quarter revenue rose 4 percent to $3.7 billion.
GM Financial's previous guidance had used-vehicle values in its lease portfolio down 4 to 5 percent, Berce said. That guidance has been revised to 3 percent, which "provided a tailwind to earnings because values weren't down as much as we thought they might be," he said.