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Here are some interesting facts about Ally Financial, formerly General Motors Acceptance Corporation (GMAC). Data as of December 31, 2012.
- For the second year in a row, Ally Financial was the largest provider of vehicle financing in the U.S.
- The average loan-to-value on used car loans was 127%. This means the loan was issued for 27% more than the car was worth before the car was even driven off the lot!
- The average loan-to-value on new cars was 110%. Once again the loan was issued for more than the value of the car!
- They issued about 1.5 million new loans in 2012
- Used vehicle loans and leases made up 46% of loan volume in 2012
- Subprime loans (loans issued to borrowers with lower than 680 FICO score) made up 24.8% of new car loans and 55.4% of used car loans. As a reference point, subprime loans made up 24.9% of new car loans in 2007.
- The average term of new car loan was 65 months and the average term of used car loan was 60 months.
I understand lenders are in the business of lending money but after reading the above facts, I am puzzled over a few items:
- If I am selling a car for $X why does a borrower have to borrow 27% more (used car) or 10% more (new car) than that price?
- Has the memory of what happens when lenders recklessly lend out more money than the collateral can support faded already?
- Ally Financial is 72% owned by the American Taxpayer via the U.S. Treasury owning 72% of the common stock of Ally as part of their 2008/9 financial crises bailout. Why are our tax dollars being lent out at 27% or even 10% over what the item being bought was sold for?
Sources: Experian. Ally Financial
