Ally reduces leasing in Q3
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DETROIT -- Ally Financial Inc.'s auto loan and lease originations dipped 1.2 percent to $8.1 billion in the third quarter, the company said Wednesday.
Ally has targeted reducing lease volume. It’s also been working to increase business in what it calls its growth channel, consisting of franchised dealers who sell brands other than Chrysler or those from General Motors.
Net lease revenue fell 33 percent to $162 million in the quarter, in line with Ally's goals. In the first quarter, Ally said it would prioritize used-vehicle financing over leasing.
"Our [lease] balance continues to decline, but that steady state is coming pretty close," CFO Chris Halmy said during Ally's third-quarter earnings call Wednesday. "We like leasing. We're comfortable with the residuals. It's a very profitable business for us, but we'll probably hit that equilibrium somewhere around that $8 billion-type balance."
Lease originations declined 10 percent to $900 million in the third quarter while used-vehicle originations slipped 5.2 percent to $3.6 billion. New-vehicle originations were flat at $3.5 billion, but within the new-vehicle originations, General Motors and Chrysler loans fell, while loan originations in Ally's growth channel -- covering other automakers -- grew 15 percent.
Despite the used-vehicle origination dip, used-vehicle loans gained share in Ally’s total auto finance origination mix. Last quarter, used-vehicle loans made up 45 percent of originations, compared with 40 percent the year earlier. New-vehicle loans accounted for 44 percent, a five-percentage-point fall from the year earlier, and lease origination share held flat at 11 percent.
"We continue to navigate the cyclical dynamics within auto finance, while driving higher risk-adjusted returns on new originations and maintaining credit discipline," Ally CEO Jeffrey Brown said in the company's statement.
In Ally's insurance business, written premiums rose 7.9 percent to $272 million, driven by growth in F&I and vehicle inventory insurance written premiums, the statement said.
Overall net income for the lender jumped 35 percent to $282 million as a higher provision for loan losses and noninterest expense were offset by an 8.5 percent increase in net financing revenue to $1.08 billion, the company said in the statement.
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