Ally’s North American Automotive Finance segment yesterday reported auto originations of $11.7 billion, up from $10.3 billion in 2Q11. And while two quarters remain until next year, industry leaders need to start planning their 2013 budgets now if they aspire to maximize on the market’s recent success, like Ally has done.
According to the 2012 Big Wheel Auto Finance Report, Ally swept both the loan and lease originations for 2011 as originations totaled $40.2 billion in 2011, up from $31.6 billion in 2010. Part of that is due to critical planning.
“Ally’s auto finance franchise continued to lead the industry, despite intense competition, and posted the second highest quarter of consumer originations since 2007,” said Ally Chief Executive Officer Michael A. Carpenter. “We continue to broaden and diversify this franchise, which is centered on powering thousands of dealers across the country as the top auto finance provider.”
By strategically planning around the sector’s growth, Ally Financial singularly led the auto lending and leasing industry in 2011. Its 2Q12 earnings reflect that this could be an even stronger year, but planning 2013’s budget is crucial for its future success.
Businesses, like Ally, need today’s data to predict tomorrow’s sales, and getting that information is easy. We publish all the numbers you need to help make this your company’s best year yet.
The Big Wheels Auto Finance Data Report 2012 comprehensively delivers in-depth analysis and provides all the numbers to help auto sector businesses plan its budget accordingly based on actual market changes. The report also ranks the top 100 auto finance companies. This year, Ally Financial topped the rankings with $73.2 billion of loans and leases outstanding, beating its closest competitor, Toyota Motor Credit, by nearly $10 billion.
Stay in front of the competition. Big Wheels is your tool to benchmark your performance. Before planning next year’s budget, order the 2012 Big Wheels Data Report by visiting www.BigWheelsData.com.
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The Auto Finance Big Wheels (www.bigwheelsdata.com) data report is the nation’s only tabulation of auto lending and leasing. The report uses a wide range of data to formulate its ranking of the top 100 auto finance companies. The report has been published annually since 1999, and is published jointly by Auto Finance News and Auto Finance Advisors, the auto finance industry’s leading consultancy. To order Big Wheels, please visit www.bigwheelsdata.com. Members of the media can receive commentary on the data by contacting Marcie Belles at 212-991-6733 or [email protected]. Find out more about Auto Finance News and Auto Finance Advisors by joining our group, Auto Finance Executives on LinkedIn and following us on twitter @AutoFinanceNews.
Consumers have always wanted the deck stacked in their favor, but the Internet gives them a compelling tool to dictate negotiation. The Saturn business model allows the dealer in the market to set prices. Now the only business model that protects dealer profitability is going away.
Before the Internet, it was difficult to make money on new vehicles unless the demand exceeded supply. The Internet has triggered a “free for all” scenario on readily available vehicles. But the profit on the new vehicle is only the beginning of the dealer’s opportunity. Most dealers know that the most important thing is to get the deal without over appraising the trade to get it. F&I is the real profit center. And the new car franchise adds tremendous credibility to a used vehicle operation.
We should also keep in mind credit issues. Three years ago, approximately 37% of consumers had a car buying credit score over 700. Now the “good credit” threshold seems to have moved up to 720, while the number of consumers who fall in this category is estimated to be in the low 20’s. Many dealers advertise to credit challenged consumers who are glad to pay whatever if the dealer can get them “bought.” We shouldn’t assume that every buyer is “Internet armed” and “fast lane” credit qualified. But determining which customer is a traditional walk in, which is “Internet armed,” and which is “credit challenged” is difficult to do over the telephone or on sight.
In the realm of pre-owned, used vehicles are becoming more and more a commodity, thanks to the Web. To maximize “turn rate” it is essential for dealers to price competitively. The old “cost plus” model has been largely discredited, although some dealers still cling to the old ways. Read Dale Pollak’s excellent book “Velocity” for his take on how the pre-owned business has evolved. His company, vAuto, is predicated on these theories. And it is a thriving concern!
I wish I could predict where all this is going to lead, but we are truly on new ground these days. It seems clear that dealers will be forced to engage on the consumer’s terms or be left out. How to make money on the consumer’s terms is the new challenge.
A dealer who’s costs are too high on a per vehicle basis just can’t compete. Chrysler and GM think that by cutting dealers, the remaining ones can be profitable and build ever larger and more expensive monuments to the factory. The new reality is that the monitor on the consumer’s PC is the new showroom. The big fancy dealership with acres of inventory is a losing proposition. But the OEMs just can’t let go. Of course, it’s not their money.
It becomes apparent to me that cutting dealerships was largely mandated by the government “task force,” who were trying to make GM and Chrysler over based on their nebulous understanding of the Toyota model of high “through put.” I recently saw a piece quoting Mark LaNeve of GM as saying he is worried about losing so many rural dealers. The idea that consumers will drive long distances because of brand loyalty flies in the face of the new realities. Toyota has acknowledged that the lack of sales of its very fine Tundra truck is largely due to the distances consumers have to travel from rural areas to buy them.
Now I see Mr. LaNeve is leaving GM. One of these days LaNeve, Wagoner, Fong, Nardelli, Press, or another exec familiar with what happened with the dealer terminations is going to write a “tell all” book and we’ll know the truth. The idea that they would save appreciable money by closing dealerships is a total laugh. The idea that fewer dealers enables bigger and pricier facilities will go no where. Wringing all possible cost out of each transaction will be essential to success in the future as there will be loads of downward pricing pressure on gross profits.