Ally Bank 2012 Annual Report Download - page 4

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Our Dealer Financial Services operations offer a wide range of financial services and insurance products to almost 15,000 automotive
dealerships and approximately 4 million of their retail customers. We have deep dealer relationships that have been built over our greater-than
90-year history. Our dealer-focused business model encourages dealers to use our broad range of products through incentive programs like
our Ally Dealer Rewards program, which rewards individual dealers based on the depth and breadth of our relationship. During 2012, 73% of
our U.S. automotive dealer customers received benefits under the Ally Dealer Rewards program, which was initiated in 2009. Our automotive
finance services include providing retail installment sales contracts, loans, and leases, offering term loans to dealers, financing dealer
floorplans and other lines of credit to dealers, fleet leasing, and vehicle remarketing services. We also offer retail vehicle service contracts and
commercial insurance primarily covering dealers' wholesale vehicle inventories. We are a leading provider of vehicle service contracts and
maintenance coverage.
Dealer Financial Services is supported by approximately 4,400 employees in the United States. A significant portion of our Dealer
Financial Services business is conducted with or through GM- and Chrysler-franchised dealers and their customers.
Automotive Finance
Our Automotive Finance operations consist of automotive finance business generated primarily in the United States. At December 31,
2012, our Automotive Finance operations had $128.4 billion of assets and generated $3.1 billion of total net revenue in 2012. According to
Experian Automotive, we were the largest independent provider of new retail automotive loans to franchised dealers in the United States
during 2012. We have approximately 1,600 automotive finance and 600 insurance employees across the United States focused on serving the
needs of our dealer customers with finance and insurance products, expanding the number of overall dealer and automotive manufacturer
relationships, and supporting our dealer lending and underwriting functions. In addition, we have over 1,600 employees that support our
servicing operations. We manage commercial account servicing for approximately 5,000 dealers that utilize our floorplan inventory lending or
other commercial loans. We provide consumer asset servicing for a $75.3 billion portfolio at December 31, 2012. The extensive infrastructure
and experience of our servicing operations are important to our ability to minimize our loan losses and enable us to deliver favorable customer
experience to both our dealers and their retail customers.
Our success as an automotive finance provider is driven by the consistent and broad range of products and services we offer to dealers
who originate loans and leases to their retail customers who are acquiring new and used automobiles. Ally and other automotive finance
providers purchase these loans and leases from automotive dealers. Automotive dealers are independently owned businesses and are our
primary customers. Our growth strategy continues to focus on diversifying the franchise by expanding into different products as well as
broadening our network of dealer relationships. During 2012, we continued to focus on the used vehicle segment primarily through franchised
dealers, which resulted in strong growth in used vehicle financing volume. The fragmented used vehicle financing market provides an
attractive opportunity that we believe will further expand and support our dealer relationships and increase our volume of retail loan
originations.
Automotive dealers desire a full range of financial products, including new and used vehicle inventory financing, inventory insurance,
working capital and capital improvement loans, and vehicle remarketing services to conduct their respective businesses as well as service
contracts and guaranteed asset protection (GAP) products to offer their customers. We have consistently provided this full suite of products to
dealers.
For consumers, we provide retail automotive financing for new and used vehicles and leasing for new vehicles. In the United States,
retail financing for the purchase of vehicles takes the form of installment sales financing. During 2012, we originated a total of 1.5 million
automotive loans and leases totaling approximately $38.7 billion.
Our consumer automotive financing operations generate revenue through finance charges or lease payments and fees paid by customers
on the retail contracts and leases. We also recognize a gain or loss on the remarketing of the vehicles financed through lease contracts at the
end of the lease. When the lease contract is originated, we estimate the residual value of the leased vehicle at lease termination. Periodically
we revise the projected value of the leased vehicle at lease termination. Our actual sales proceeds from remarketing the vehicle may be higher
or lower than the estimated residual value.
Automotive manufacturers may elect as a marketing incentive to sponsor special financing programs for retail sales of their respective
vehicles. The manufacturer can lower the financing rate paid by the customer on either a retail contract or a lease by paying us the present
value of the difference between the customer rate and our standard market rates at contract inception. These marketing incentives are referred
to as rate support or subvention. GM may also from time to time offer lease pull-ahead programs, which encourage consumers to terminate
existing leases early if they acquire a new GM vehicle. As part of these programs, we waive all or a portion of the customer's remaining
payment obligation. In most cases, GM compensates us for a portion of the foregone revenue from those waived payments after consideration
of the extent that our remarketing sale proceeds are higher than otherwise would be realized if the vehicle had been remarketed at lease
contract maturity. Manufacturers may also elect to lower a customer's lease payments through residual support incentive programs. In these
instances, we agree to increase the projected value of the vehicle at the time the lease contract was signed in exchange for a payment from the
manufacturer.
Our commercial automotive financing operations primarily fund dealer inventory purchases of new and used vehicles, commonly
referred to as wholesale or floorplan financing. This represents the largest portion of our commercial automotive financing business. We also
extend lines of credit to individual dealers. In general, each wholesale credit line is secured by all the vehicles financed and, in some
instances, by other assets owned by the dealer or by a personal guarantee. The amount we advance to dealers is equal to 100% of the
Table of Contents Ally Financial Inc. • Form 10-K