Ally Bank 2012 Annual Report Download - page 41

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Consumer Automotive Financing Volume
The following table summarizes our new and used vehicle consumer financing volume, including lease, and our share of consumer sales
in the United States.
Consumer automotive
financing volume % Share of consumer sales
Year ended December 31, (units in thousands)2012 2011 2010 2012 2011 2010
GM new vehicles 579 707 596 30 38 38
Chrysler new vehicles 315 304 302 26 32 45
Other non-GM / Chrysler new vehicles 81 68 33
Used vehicles 485 466 255
Total consumer automotive financing volume 1,460 1,545 1,186
The decline in consumer automotive financing volume in 2012, compared to 2011, was primarily driven by lower retail penetration at
both GM and Chrysler in the United States. Additionally, both used and non-GM/Chrysler originations were higher due to the continued
strategic focus within these markets. We continue to increase our focus on used vehicle financing, primarily through franchised dealers. The
decrease in GM and Chrysler penetration during the year ended December 31, 2012 was primarily due to the market for automotive financing
growing more competitive as more consumers are financing their vehicle purchases and as more competitors continue to enter this market as a
result of how well automotive finance assets generally performed relative to other asset classes during the 2008 economic downturn.
Manufacturer Marketing Incentives
Automotive manufacturers may elect to sponsor incentive programs (on both retail contracts and leases) by supporting finance rates
below the standard market rates at which we purchase retail contracts. These marketing incentives are also referred to as rate support or
subvention. When automotive manufacturers utilize these marketing incentives, we are compensated at contract inception for the present
value of the difference between the customer rate and our standard rates. For retail loans, we defer and recognize this amount as a yield
adjustment over the life of the contract. For lease contracts, this payment reduces our cost basis in the underlying lease asset.
Automotive manufacturers may also provide incentives on leased vehicles by supporting an above-market residual value, referred to as
residual support, to encourage consumers to lease vehicles. Residual support results in a lower monthly lease payment for the consumer.
While we are compensated by the manufacturer at the time of lease origination to raise the contract residual, we may bear the risk of loss to
the extent the value of the leased vehicle upon remarketing is below the contract residual value of the vehicle at the time the lease contract is
signed. Under certain residual support programs, the automotive manufacturer may reimburse us to the extent remarketing sales proceeds are
less than the residual value set forth in the lease contract and no greater than our standard residual rates that would have otherwise been
applied. To the extent remarketing sales proceeds are more than the contract residual at termination, we may reimburse the automotive
manufacturer for a portion of the higher residual value.
Under what we refer to as pull-ahead programs, consumers may be encouraged by the manufacturer to terminate leases early in
conjunction with the acquisition of a new vehicle. As part of these programs, we waive all or a portion of the customer's remaining payment
obligation. Under most programs, the automotive manufacturer compensates us for a portion of the foregone revenue from the waived
payments that are offset partially to the extent that our remarketing sales proceeds are higher than otherwise would be realized if the vehicle
had been remarketed at lease contract maturity.
We are currently party to an agreement with GM pursuant to which GM initially agreed to offer all vehicle financing incentives to
customers through Ally. However, the agreement, which was originally entered into in November 2006, provides for annual reductions in the
percentage of financing subvention programs that GM is required to provide through Ally, and currently applies to a limited percentage. The
agreement expires on December 31, 2013.
We are also party to an agreement to make available automotive financing products and services to Chrysler dealers and customers. We
provide dealer financing and services and retail financing to qualified Chrysler dealers and customers as we deem appropriate according to
our credit policies and in our sole discretion, and Chrysler is obligated to use Ally for a designated minimum threshold percentage of Chrysler
retail financing subvention programs. On April 25, 2012, Chrysler provided us with notification of nonrenewal related to this agreement and
as a result, the agreement will expire on April 30, 2013.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K