General Motors’ captive finance arm, GM Financial, will reduce its leasing business in the second half of 2017.
During the second quarter, GM Financial originated $6.7 billion in leases, up from the $6.5 billion a year ago. In the first half of 2017, GMF’s lease originations were $13 billion, compared to $13.2 billion in the first half of 2016. Leasing made up roughly 31 percent of GM U.S. retail sales in the second quarter according to Stevens, slightly higher than the 30 percent industry-wide.
But in the second half of the year, GMF will dial back leasing, and is targeting a lease penetration of 25 to 30 percent.
“In June, we came down to 29 percent” leasing for GM overall, and GM would likely “bring that down,” Stevens said. “We are reasonably comfortable in the 25 to 30 percent range.”
The move is an effort to reduce exposure to future losses on residual values. Industry forecast pegs values of used cars to fall as inventory of used cars increases.
Stevens also added that in today’s environment of rising interest rates, boosting incentives on loans would likely make loans more attractive relative to leases. So perhaps we can expect more loan-related incentives from The General to steer buyers from leasing.