Ally, Daimler AG, and Volkswagen AG all saw originations climb in the first quarter, in addition to an increased focus on financing in China for Daimler and VW.
Ally originated $9.5 billion in the quarter, a 7% year over year increase and took in record-high used volume of $4.8 billion, which reflects the banks’ positioning over the past several years to source more used applications for dealers, Jennifer LeClair, chief financial officer, said on Wednesdays’ call.
“The year-over-year increase in used applications is notable, where we saw 100,000 more this quarter,” she said. “There’s a lot of focus on industry sales or SAR flattening. But we are seeing a lot of opportunities to originate profitable loans to enable us to optimize our risk-adjusted return and drive earnings growth.”
In addition to the used volume Ally also originated $3.6 billion in new retail volume, and $1 billion in leases.
“We’re holding the line on credit, and yields continue to increase. For the first time in a quarter, used originations represented over 50% of our volume,” Jeffrey Brown, chief executive of Ally also said on the call.
But Ally also saw a decline in charge-offs, with net charge-offs of 1.47% of total outstandings down 7 basis points year over year.
“We continue to expect retail auto charge-offs in the 1.4% to 1.6% range, while yields see further upward momentum,” Brown said, while adding later that he thinks there is a “danger” in looking too closely at delinquencies since it is only a snapshot of a particular moment or time period. “I think when we dive into the details, what we’re not seeing is delinquencies falling to loss rates. We’re just not seeing that trend. So we feel good overall about the state of credit,” he said.
In the Americas Daimler originated $6.4 billion in total volume while worldwide originations grew 6% year over year to $21.6 billion.
“Daimler Financial Services anticipates further growth in contract volume in the year 2018,” the report read. “This will be primarily driven by the strong development of new business in 2017, which should continue at the same high level this year. The division will utilize new market potential, above all in China, as well as through new and digital possibilities for customer contacts – in particular by systematically further developing its online sales channels.”
Volkswagen Financial Services’ number of financing, leasing, service, and insurance contracts originated in the first quarter grew 5.8% to 1.8 million loans. That brought the total number of contracts in the lenders portfolio to 19.1 million — 9% higher year over year.
“Volkswagen Financial Services remained in high demand in the first quarter of 2018, due primarily to the positive development of the overall market for passenger cars and the persistently low key interest rates in the main currency areas,” the report said.
Additionally, VW found that demand for financial services in the Asia-region was mixed.
“In China, the proportion of loan-financed vehicle purchases rose compared to the prior-year period. Despite increasing restrictions on registrations in metropolitan areas, there is considerable potential to acquire new customers for automotive-related financial services, particularly in the interior of the country. A somewhat weaker demand for vehicle financing was seen in Japan,” the report said, but did not break out numbers.