GM Financial's auto loans climb, delinquencies fall

DETROIT — GM Financial's loan and lease originations climbed in the third quarter, even as General Motors' U.S. light-vehicle sales fell 9.9 percent, and more customers paid their loans on time, despite economic uncertainty.

Only 2.1 percent of payments were 31 to 60 days past due during the quarter, compared with 3 percent in the third quarter of 2019.

"In a period of higher unemployment and economic uncertainty, we would normally see higher delinquency and higher losses. It was completely against the trend of what we should see," Dan Berce, CEO of GM Financial, told Automotive News.

Government stimulus cash and relief provided by GM Financial helped consumers early in the pandemic, he said. But lately, consumers have changed their spending behavior to prioritize paying off debt.

"They're not spending money on entertainment, vacations and restaurants," he said. "Instead they are making debt payments, in particular automobile payments, because they have to have a vehicle without traditional access to mass transit or Uber."

Even after supplemental unemployment payments expired in July, GM Financial hasn't seen significant changes in consumer payment rates, he said.

"We extended deferments to 6.7 percent of the [loan] customer base between the middle of March until the end of June. All of those customers are making payments now and only a single-digit amount have needed another extension," he said. "It is fair to say that that is past us at this point and isn't a factor in portfolio performance."

GM's captive originated $12.8 billion in loans and leases during the third quarter, a 14 percent increase from a year earlier as the captive's share of GM's U.S. retail sales grew to 42.6 percent from 36.7 percent.

Loan originations surged 35 percent year over year to $7.3 billion but declined from the second quarter, when GM offered 0 percent financing for 84 months and other generous incentives to help draw in customers. Those offers tapered off in the third quarter as demand rebounded.

Many traditional lease customers also chose to finance their vehicles in the second quarter because of the incentive programs. Though down from a year earlier, third-quarter leasing levels grew from the second quarter as dealerships in states with typically high lease penetrations, such as New York and Michigan, resumed more normal operations.

"Both of those states had pretty severe lockdowns in the second quarter. When the lockdowns lifted in the third quarter, leasing penetration came back to more normal levels," Berce said.

GM Financial's net income surged 73 percent to $893 million, largely as a result of lower cost of funds, strong consumer credit and high used-vehicle values.

"We have a large amount of cars coming off lease every month. We've been able to benefit from the high used-car values by selling those vehicles at a gain," Berce said. "That was a big part of the overall results for the quarter."