Nearly 9 out of 10 GM Financial lease customers opted to purchase their leases rather than pay a premium on a new vehicle or wait for dealers to restock their inventory, GM Financial said last week.
Only 11 percent of customers with expiring leases in the second quarter returned their vehicles to GM Financial when their contracts expired. The remaining 89 percent either purchased their vehicles at the contract price, or the grounding dealer bought the vehicle.
The contract value is generally lower than today’s wholesale prices as the inventory shortage continues to result in high used-vehicle values.
GM Financial remarketed only 32,900 vehicles in the second quarter, down more than 60 percent from a year earlier, said CEO Dan Berce.
Despite a chunk of missed profit as the lender lost the chance to remarket many off-lease vehicles at auction, net income for General Motors’ captive surged to $1.2 billion, compared with $173 million a year earlier, GM Financial said in a statement last week. High used-vehicle values, strong consumer credit and low costs of funds drove the gain, Berce told Automotive News.
GM Financial originated $9.1 billion in retail loans, up 5 percent from a year earlier, and $5.9 billion in leases, an 86 percent surge from a year earlier.
The lender paid a $600 million dividend to GM and financed 43 percent of GM’s sales in the second quarter. It is targeting 45 to 50 percent of GM’s portfolio.
“Even though our penetration of 43 percent fell a bit short of our target, we’re originating more loan volume than planned,” Berce said.
As average transaction prices rise, so does the average amount financed, he said.
“We’re hitting our asset growth targets despite the fact that penetration is a little short,” said Berce.
On the floorplan side, GM Financial was the lender for 36 percent of GM dealers.
“By Labor Day, we will have gained more share in 2021 than we did in all of 2020,” said Berce. “We’ve got really good momentum in that business.”
But GM Financial expects headwinds in the second half of the year. Earnings are expected to be $1 billion to $1.5 billion lower than in the first half of 2021, partially because of diminishing lease return volume and normalizing consumer credit performance.
The captive also factored in allowance adjustments during the first half of 2020, anticipating higher losses during the early months of the coronavirus pandemic. Those losses did not materialize, and first-half results benefited from GM Financial’s reversal of those reserves.