DETROIT–Auto sales may remain robust, but the auto finance sector is hitting some potholes, according to a new analysis.
Ally Financial, the former General Motors Acceptance Corp., said it is feeling a pinch from rising defaults and falling used car prices, according to the Wall Street Journal.
Ally reported earlier this week that it now expects growth of between 5% and 15% in adjusted earnings per share in 2017, a “soft downgrade” from its earlier forecast. The decline in used car prices has made leases less profitable by lowering the residual value of a car when its lease ends, the Journal noted.
The National Automobile Dealers Association said last week its used-car price index fell by 8% from a year earlier in February to its lowest level since 2010.
Ally also said defaults on auto loans are on the rise in lower credit tiers, though prime borrowers are still in good shape, the Journal reported.
Meanwhile, shares of Santander Consumer Holdings, another significant auto lender, have fallen, as have shares at Credit Acceptance Corp. Both companies have portfolios of subprime auto loans, over which several analysts have raised concerns.