Ally Financial expands used-car share, drives higher yields

Ally Financial‘s focus on used-vehicle originations is propping up its auto portfolio yields, according to the bank’s second-quarter earnings report.

“First and second quarter tend to be our heavy used seasons,” Chief Financial Officer Jenn LaClair said on an earnings call yesterday. “And then Q3, and especially into Q4, we tend to have more of a new-vehicle season. So we would expect yields for full year to be in that 7% to 7.5% range,” she said, adding that Ally’s retail auto portfolio yield increased 50 basis points year over year.

The Detroit-based auto lender originated $9.7 billion of auto loans and leases, up from $9.6 billion in the prior-year period. Used vehicles accounted for 54% of new contracts, compared with 51% in 2Q18. Leases comprised 11% of new originations in the second quarter, and new vehicles accounted for 36%.

Additionally, Ally’s new-car originations were decisioned from a record 3.3 million loan applications, a 9% year-over-year increase.

“We grew our dealer relationships this quarter to over 18,000 dealers, the 21st consecutive quarter where we’ve expanded our reach,” Chief Executive Jeff Brown said during a conference call yesterday.

Outstandings also increased on a year-over-year basis, rising to $80.6 billion from $78.5 billion.

“The broad reach we have with dealers and increased application flow drives our ability to generate volume, maintain disciplined underwriting and grow strong risk adjusted margins,” LaClair said.

Meanwhile, net charge-offs fell 9 basis points to 0.95% year over year. However, 60-day delinquencies rose 7 basis points to 0.56%.

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