Ally achieved this performance while raising interest rates. Last quarter’s lending is expected to return a 7.82 percent yield, up 0.75 point from Ally’s first-quarter originations and “reflecting significant pricing action,” LaClair said. She called Ally confident it could generate even higher loan yields in the future.
“We’ll continue to put price in,” LaClair said.
Ally is pleased with both the business and the yields it’s seeing in the auto market, she said.
Ally had added more than 1.5 percentage points to its interest rate from Jan. 1 through the week before the earnings call, and it expected to have average interest rates of more than 8 percent during the third quarter, according to LaClair.
She said the bank’s ability to do this without lowering creditworthiness standards reflected dealership willingness to send Ally loans. The lender during the second quarter counted 22,408 dealerships borrowing from it or referring customers to Ally financing, a 14 percent increase from a year earlier.
Brown said the auto finance market was becoming more competitive but felt the company’s dealer relationships would keep it in the running for future deals.
“I don’t think you can overstate the importance of growth in the dealer count,” he said.
LaClair said Ally’s interest rates through the second quarter have moved very similarly to the federal funds rate, though the two don’t always march in step to that degree. Dealers and consumers likely will see Ally’s interest fluctuate and move less in unison with the federal rate going forward, she said — particularly as Ally expects the Fed to raise interest rates eight more times.
Traditionally, increases in interest rates haven’t affected vehicle demand, LaClair said.
“I would say that this cycle is very similar to what we’ve seen in the past,” she said.
A 1-point increase on a car loan is approximately just $15 to $20 more a month, LaClair estimated. A customer right now might be paying that amount for “two loaves of bread,” she said.
