Ally forecasts 15% decline in used-car prices by end of 2023

Ally Financial, one of the nation's largest auto lenders, said it anticipates at least a 15 percent reduction in used-vehicle prices by the end of 2023.

Prices have been increasing, and the path to Ally's estimated cumulative decline of 15 to 20 percent in the next two years might not follow a straight line, CFO Jenn LaClair noted on the lender's fourth-quarter earnings call Friday.

CEO Jeffrey Brown said on the call that Ally's outlook involved a "really robust used-car market," but the company did see prices "moderating."

Douglas Timmerman, Ally's Dealer Financial Services president, told Automotive News on Friday that Ally expected "a slow unwind," a pace that represented "probably the best of scenarios for all stakeholders," including dealerships and consumers.

The average used vehicle sold for $28,205 in December, up 28 percent from the same time a year earlier, Kelley Blue Book said the same day as the earnings call.

In 2020, the average 5-year-old vehicle depreciated 49 percent, iSeeCars.com estimated. In 2021, that number improved to 40 percent.

In terms of supply, both Brown and LaClair described increased vehicle inventory among dealers.

"We are seeing some very modest uptick in inventory levels," Brown said.

Ally's commercial auto lending balances — a major component of which is floorplan borrowing — grew for the first time in five quarters to $16.1 billion.

"This was driven by a 15 percent rebound (quarter over quarter) in industry inventory, a modest but positive trend occurring ahead of our expectation for growth later this year," LaClair said.

However, inventory remained 70 percent below pre-pandemic levels, she told Automotive News on Friday.

Ally said floorplan outstanding rose from $7.6 billion in the third quarter to $11.1 billion in the fourth quarter.

LaClair told analysts that while rising used-vehicle prices improved Ally's lease yields, falling prices that lowered those yields would provide Ally with greater floorplan revenue.

"We have the hedge on the reverse," she said.