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GM Financial posted higher net income during the first quarter, despite low vehicle supply and slightly lower used-vehicle prices.
Net income rose 9.6 percent from a year earlier to $962 million. Adjusted pretax profit rose 8.6 percent to $1.3 billion. Revenue fell 7.4 percent to $3.2 billion, the captive reported in an earnings statement last week.
General Motors‘ captive did not expect used-vehicle values to negatively impact its financial performance unless prices decreased 10 to 15 percent further, GM Financial CEO Dan Berce told Automotive News.
“Used-car pricing is still relatively firm. It dipped in the first 10 weeks of 2022, and it has firmed a bit since,” he said.
GM Financial sold 99 percent of its vehicles to off-lease customers and dealers at contract residual prices in the quarter. The contract residual value is typically about 10 to 15 percent lower than market prices, Berce said.
“We would consider that 10 to 15 percent a buffer, so used-car prices could decrease that much before it started to affect our results,” he said.
Loan originations dipped 2 percent to $8.1 billion because of low vehicle inventory, and lease originations plunged 39 percent because of both low inventory levels and few incentives.
For the full year, GM Financial expects pretax earnings of $3.5 billion to $4 billion, falling short of the $5 billion in pretax income the captive earned last year.
Residual gains in 2022 will be less than in 2021 in part because of lower off-lease volume, Berce said, and gains per vehicle also will fall as values remain high.
“Even if we get the selling prices that we’re seeing in the used-car market today, the book value is higher, so the gains are lower,” Berce told analysts during GM’s earnings call last week.
GM Financial’s share of GM’s retail loans increased to 46 percent in the quarter from 44 percent a year earlier, which showed effective collaboration between GM brands and GM Financial to promote the captive to dealers, Berce said.
GM Financial’s floorplan penetration among GM dealers also rose slightly, to about 41 percent.
The captive did not pay a dividend to its automaker parent during the quarter, but Berce said it planned to pay a dividend of more than $1.2 billion for the full year.
In 2021, GM Financial paid $3.5 billion. From 2017 to 2020, the captive paid a total of $2.1 billion.
Berce said in February that the dividend in 2022 could be larger if credit and used-vehicle pricing had more upside than expected.
GM last week posted first-quarter net income of $2.9 billion, down 2.7 percent from a year earlier, and global revenue of $36 billion, up 11 percent.