General Motors Financial Co. is entering the third phase of its captive strategy — a business plan set in motion after its acquisition by General Motors Corp. in 2010 — which includes increasing its share of prime loans, according to Chris Choate, GMF’s executive vice president and chief financial officer.
GMF’s portfolio is “shifting to predominantly higher-credit-quality assets,” which is “driven by lease exclusivity and increase in prime loan penetration,” Choate said during GMF’s “Behind the Charts” conference call today.
GMF’s first quarter prime loan and lease originations rose 125% to $6.3 million, from $2.8 million the same time a year prior. First quarter subprime originations lowered 14% to $1.7 million, from $1.5 million a year prior.
GMF has allowed its marketshare in the subprime and used vehicle space to “erode dramatically” as the market got frothier and too narrowly priced, Choate said. “We still have a presence in the space, but it’s way down from where it was.”
However, GMF views the overall industry pullback in subprime as a “blanket observation,” he added. “If you look at market data month by month, there are any number of smaller and larger players that mash on the gas in subprime and then pull back; it ebbs and flows.” Many auto dealers can easily develop a view that the market has tightened because one of its primary lenders may have “ebbed versus flowed,” he added.
GMF does not think there will become a “lack of credit availability in subprime,” Choate added. “It’s certainly possible that pricing will firm a bit in subprime, but I don’t believe you will see any dramatic tightening. General credit appetite, at least across the larger players, we think it will be fairly stable.”
