October 2020 marked the ten-year anniversary of the creation of GM Financial, General Motors’ captive finance arm.
Let’s take a quick look at where it all started. Back in 2010, General Motors acquired AmeriCredit for $3.5 billion, renaming the company GM Financial and establishing a new in-house financing arm to provide vehicle financing and leasing options across the U.S. and Canada.
Fresh out of bankruptcy, the “new GM” badly needed a new captive finance arm. For those who may not know, a captive finance company is a wholly-owned subsidiary that provides finance and lease services, as well as floorplan financing for dealers. Additionally, it allows GM to retain customers, as it works to manage customer data and drive repeat purchases. Basically, General Motors needed a finance subsidiary to help it effectively compete.
The creation of GM Financial followed the sale of GM’s previous captive finance arm, GMAC. GM had previously sold all GMAC shares in a bid to raise much-needed capital, and as such, GMAC eventually turned into Ally and ended direct association with the automaker.
As such, GM turned to acquire AmeriCredit, essentially a sub-prime auto loan firm, just two months after announcing plans to do so.
Fast forward to today, and GM Financial is now celebrating 10 years as GM’s captive finance arm. Interestingly, the subsidiary is still headed by Dan Berce, the same person who ran AmeriCredit.
“GM’s growing captive finance company has become an integral and strategic business unit since it was acquired in 2010 and renamed GM Financial, supporting both customers and dealers across economic cycles,” GM recently stated.
Here are a few key figures for the subsidiary:
- GM Financial’s penetration of total U.S. GM retail sales was 53 percent in Q2 of 2020, driven by strong dealer engagement with the captive finance company.
- Volume for GM Financial’s online credit application was up 27 percent year-over-year for the first half of 2020, with more customers shopping online due to the pandemic.
- For the fourth consecutive year, GM Financial was ranked first in finance captive loyalty, with loyalty rates among current lease and loan customers at 78 percent and 68 percent, respectively, based on CY 2019 IHS Markit Return to Market Manufacturer Loyalty data.
- GM Financial generated nearly 2 million leads over the last 12 months, helping drive more than 400,000 vehicle sales, 73 percent of which were financed by GM Financial.
Nevertheless, GM Financial is a big contributor to General Motors’ bottom line – in Q3 of 2020, GM Finical posted a $1.2 billion EBT, a sizable jump over the $0.7 billion EBT in the year-ago quarter.