In terms of volume, Ally Financial almost, but didn’t quite, make up for the loss of GM lease business in the second quarter.
Ally reported second-quarter results today. Net income was $182 million, down from $323 million a year ago. The latest results included a $155 million pre-tax charge for early extinguishment of high-cost, legacy debt.
Total consumer auto originations were relatively flat for Ally in the second quarter at $10.8 billion, down from $10.9 billion a year ago, but the mix has changed significantly since GM stopped steering lease incentives to Ally earlier this year.
Ally’s strategy is to make up for the loss of GM-subvented business with more standard-rate business, more used-vehicle loans, more subprime loans, and more loans through non-GM and non-Chrysler dealers. Both OEMs previously used Ally as an exclusive preferred lender, but the exclusive nature of those relationships has been phased out.
The second quarter was the first full quarter in which GM directed all of its lease incentives to captive finance company GM Financial instead of sharing them among Ally, GM Financial and U.S. Bank.
Ally reported about $100 million in GM leases in the second quarter, down from $2.7 billion a year ago.
Leases accounted for just 9% of Ally originations for the quarter, down from 29% a year ago. Total GM consumer originations accounted for 45% of Ally consumer originations in the second quarter, down from 63% in the second quarter of 2014.
Ally also reported an increase in its mix of subprime loans, defined as loans to customers with Fico scores below 620. Subprime accounted for 13.7% of Ally originations in the second quarter, up from 9.4% a year ago.
