DETROIT — As the auto retail industry braces for the record wave of returning off-lease vehicles to crash ashore in 2019, executives at Ally Financial say the company is more than prepared for the flood.
Lease returns are expected to eclipse 4 million units this year, according to both Edmunds and Cox Automotive, and Ally CEO Jeff Brown says the lender's flexible business strategy and diverse auto portfolio positions the company well.
"From our perspective, these are 4 million units that now have an opportunity to be financed. We think our volumes are going to stay quite strong for the rest of the year," Brown told Automotive News after Ally reported first-quarter results last week. "Beyond 2020, we'll respond to the markets."
Used-vehicle originations have made up more than half of Ally's auto portfolio for five consecutive quarters, according to Brown. Used-vehicle originations climbed 8.3 percent to $5.2 billion in 2019's first quarter, comprising 56 percent of Ally's auto portfolio. Last year, used-vehicle originations made up half of the portfolio.
Consumers have increasingly turned to the used-vehicle market as affordability challenges have arisen on the new-vehicle side. Nearly two-thirds of car shoppers are now leaning toward a used vehicle, according to a recent Cox Automotive survey. According to J.D. Power, franchised dealerships set record-high used-vehicle sales in the first quarter of 2019, moving 3.15 million units.
As automakers continue to peel back incentives and dealers focus on used-vehicle transactions, Brown said he doesn't believe Ally's used-vehicle origination levels will drop off anytime soon.
Ally, one of the top auto lenders in the U.S., is also poised for an uptick in off-lease business through its digital platforms, according to CFO Jenn LaClair. That strength stems from Ally's origins as General Motors Acceptance Corp., the former in-house captive finance arm for General Motors.
SmartAuction, a wholesale used-vehicle auction website inherited from the lender's GMAC days, not only provides Ally understanding of used-vehicle prices based on real-time sales on the site, but also pulls fee income from dealers who use the platform. Ally runs 250,000 to 300,000 off-lease vehicles through its SmartAuction platform every year, LaClair said.