Called Ally Buyer’s Choice, the financing option was introduced more than a year ago to the Canadian Market in response to the Bank Act, which prevents banks there from offering leasing. Now Ally is bringing it to the U.S. market, introducing it yesterday at General Motors and Chrysler dealerships in California, Florida, Illinois, New York and Texas, according to F&I and Showroom magazine.

“As a bank, you can’t lease in Canada. So, what gave rise to it up there is we were looking for something that would allow us to have the benefits of leasing in a financing arrangement,” said Tim Russi, executive vice present for Ally’s North American Operations. “After we saw how the program performed up there, we thought there would be a reasonably-sized opportunity in the U.S. [market] to provide the product.”

As for the 48-month sell option, Russi said the predetermined value is calculated the same way Ally sets its lease residuals. He added that loan terms do not factor into the calculation, as two people who finance the same vehicle at different terms will get the same amount back if opt for the sell option. As for how the company landed on month 48 for the sell option, Russi said that’s the average life of the company’s financing arrangement.

The main thrust of the product is to eliminate consumer fears of making a large purchase in these still-unsettling economic times, Russi said. But the product also aims to reduce consumer buying cycles, drive floor traffic, and, maybe, help dealers replenish their used-vehicle inventory. He also noted another possible advantage to the program.

“We don’t do a lot of 84 [months], but we’d like to see 84 with this type of structure,” said Russi. “But if you’re a consumer who is signing up for 84 months’ worth of payment, you’d love to drop that term and have an idea of the value you can get out with.”

Russi added that dealers were trained on a new calculator the company developed to help them structure deals under the new program. He added that if the value of the vehicle is higher than the predetermined price at the 48th month, the owner can opt to sell the vehicle on his or her own or continue making payments.

“I think dealers see the value in it because it gives them another way to meet consumers’ needs and overcome some of their fears in making a large purchase,” Russi said. “For the consumer, there might be a lot of reasons why [he or she] may need to get out of the deal — it could be an employment- or a family-related [reason]. So, this just provides the consumer with certainly in that they can sell their vehicle to us at a set price if [he or she] needs to.”

Ally Financial, the bank-holding company that used to be known as GMAC, amassed an auto finance portfolio of $74 billion last year, $10 billion more than Toyota Financial Services, which came in second in the Auto Finance Big Wheels ranking, reported F&I and Showroom.

“Ally entered 2010 with a new brand, the overhang of its federal government bailout, and performance uncertainty swirling around its largest patron, General Motors, and rose above all that adversity to exit 2010 as the No. 1 lender in the land,” said Marcie Belles, editor of Auto Finance Big Wheels. “It’s a testament to Ally’s comprehensive strategy to garner share in all segments of the industry.”

The top 10 auto finance companies in the U.S. last year were:

1. Ally Financial
2. Toyota Financial Services
3. Chase Auto Finance
4. Ford Motor Credit Co.
5. Wells Fargo Dealer Services
6. Bank of America Dealer Financial Services
7. American Honda Finance Corp.
8. BMW Financial Services
9. Nissan Motor Acceptance Corp.
10. Santander Consumer USA

Auto Finance Big Wheels ranks the top 100 car finance companies in the nation by pouring through public documents, receiving data directly from lenders, and by applying a propriety formula for calculating outstandings and originations based on a variety of criteria. The 2011 report is the 12th annual Big Wheels published by Auto Finance Advisors, a consultancy dedicated to providing research and advisory services to the automotive lending and leasing market.

After the credit crisis sent the auto finance sector into a tailspin, the tide was turned in 2010 by a 31 percent increase in loan originations, compared with a year earlier. Toyota originated the most auto loans and leases last year.

“Last year saw the auto finance market resuscitate, and we forecast the industry to truly get its mojo back in 2012, particularly since car sales have taken off so far this year,” said Belles, who is also a principal at Auto Finance Advisors. “The market has a bright future.”

“The addition of Ally to the DealerTrack Canada network provides the company with access to retail financing applications from essentially all Canadian auto dealers across all manufacturers,” said Tom Dickerson, president of Ally Credit Canada Limited. “It is a means to broaden our customer base and to strengthen our support to the auto industry.”

Ally and DealerTrack began their strategic partnership in February 2010 when Ally joined DealerTrack’s U.S. credit application network. Ally will also continue to accept applications through the RouteOne system.

The DealerTrack Canada network allows Canadian dealers to electronically submit credit application data directly to DealerTrack-registered lenders, and facilitates the completion of lender specific documentation necessary to complete a fundable transaction.

“Now with Ally Financial on the DealerTrack Canada network, Canadian dealers will have another well-respected financing resource to tap into to help close sales,” said Michael Collins, vice president and general manager of DealerTrack Canada Inc., in Mississauga. “The DealerTrack Canada network has quickly become the go-to source for dealers to help streamline their financing processes and simplify electronic, real-time credit decisions.”

Ally financed $3.8 billion in consumer auto contracts in Canada last year. “Our presence on DealerTrack in Canada provides additional dealers with a new opportunity to get their customers financed for new and used vehicle sales,” Dickerson added.

Ally filed the paperwork Thursday to launch an IPO. The Securities and Exchange Commission must approve the nearly 500-page prospectus before the company can go public, likely in a few months.

Ally, one of the world’s largest automotive financial services companies, will first have to mount a road show to sell the offering to investors.

The Treasury Department, which owns a controlling 74 percent stake in Detroit-based Ally Financial as part of a $17.2 billion bailout, said it has agreed to be named the selling shareholder.

Treasury will retain the right to decide whether to participate in the IPO and at what level.

The government also owns $5.9 billion of mandatorily convertible preferred stock.

Ally won’t price the stock or disclose how many shares it plans to sell until just before the company goes public.

A person briefed on the matter said only Treasury is expected to sell shares, not other owners such as General Motors Co., which holds a 9.9 percent stake in Ally.

With the $2.7 billion in new proceeds, Treasury will have received about $4.9 billion in returns from Ally to date, including $2.2 billion in dividends and interest.

The company reported a $1.1 billion profit in 2010.

Citi, Goldman, Sachs & Co., J.P. Morgan and Morgan Stanley are advising Ally on its initial public offering.

With more than $172 billion in assets as of Dec. 31, 2010, Ally operates as a bank holding company.

Ally also has mortgage operations and commercial finance, and the company’s subsidiary, Ally Bank, offers retail banking products through its online arm.

Ally, which was known as GMAC Inc. until last year, was founded by GM more than 90 years ago as its in-house finance arm. It sold a 51 percent stake in the company in 2006 to Cerberus Capital Management LP in a $7.4 billion deal.

Ally will need to reassure investors that it has a stable relationship with GM, which last year acquired a subprime financing company AmeriCredit and renamed it GM Financial to form the basis of a captive finance arm.

Ally said it raised its percentage of new car lending to 9.9 percent in 2010, up from 6.1 percent, to jump from third highest to the leading auto lender.

The sale should close by the end of the week.

GM sold a 51 percent stake in GMAC, which was renamed Ally Financial, to Cerberus Capital management LP for $7.4 billion in 2006, reported The Detroit News.

As part of the sale, GM received preferred stock valued at $1.4 billion in 2006.
“Today, we are taking another step forward in our strategy to strengthen and simplify the company’s balance sheet,” said Chris Liddell, GM’s outgoing vice chairman and chief financial officer.

After GM exited bankruptcy, it valued its Ally Financial stake at $665 million.

The transaction will result in a gain of $300 million to be recorded in the first quarter of 2011.Following the sale, GM’s investment in Ally Financial will shrink to a 9.9 percent interest in Ally commonstock.

Ally Financial is 74 percent owned by the U.S. Treasury, which gave the Detroit-based auto and mortgage lender a $17.2 billion bailout.

The company hopes to launch an IPO later this year and may file its prospectus by the end of June.

Treasury Department representatives declined to comment Tuesday on GM’s announcement.

Ally makes loans to GM customers and finances dealer inventories.

The government first bailed out the company, then known as GMAC Inc., in late 2008 as part of the Bush administration’s aid to the auto industry. The Obama administration provided additional money in May and December 2009.

The Treasury Department has said that Ally has made good progress in restructuring its operations. But a congressional oversight panel in January criticized what it called Treasury’s “hands-off” approach toward Ally.

The Treasury Department hopes to get back more taxpayer money through a public stock offering of Ally.

“This appointment is part of the administration’s ongoing commitment to prudent stewardship of TARP investments,” said Tim Massad, the Treasury’s acting assistant secretary for financial stability, in a statement today, reported Bloomberg.

Durrett was formerly managing director of McKinsey & Co.’s West Coast U.S. offices and chairman of the finance committee on McKinsey’s board of directors. The Treasury Department worked with the executive search firm Spencer Stuart in identifying candidates.

Fourth-quarter earnings were $79 million, compared with a loss of $4.95 billion in the same period a year earlier, Detroit-based Ally said today in a statement. The company is 73.8 percent owned by the U.S. government and doesn’t have publicly traded shares. Annual profit was $1.1 billion versus a $10.3 billion loss in 2009, reported Bloomberg.

Chief Executive Officer Michael Carpenter is preparing the company for an initial public offering that may take place this year. Last week, Ally interviewed investment banks to manage the IPO while the U.S. Treasury Department named Perella Weinberg Partners LP to assist with the disposal of its stake.

Ally reduced risk in its mortgage business, which “significantly strengthened the company and will enable repayment of the U.S. Treasury’s investment over time,” Carpenter, 63, said in the statement.

Net income from continuing operations in North American auto finance increased to $589 million before income tax expenses in the fourth quarter from $343 million in the year- earlier period, the company said.

IPO Implications

“These results are very important for their IPO,” Mirko Mikelic, a senior money manager who helps oversee $13 billion of fixed-income assets at Fifth Third Asset Management in Grand Rapids, Michigan, said before the announcement. “It obviously helps with the pricing, and if they continue to post good results there will be strong demand.”

Carpenter said he could not comment on Ally’s initial public offering on a conference call with investors.

The mortgage business posted a $172 million pretax profit from continuing operations, compared with a loss of $180 million in the last three months of 2009.

“The mortgage area was the wild card, and that looks like where the improvements were,” Mikelic said after the results were released.

Ally said today it hasn’t found “any evidence of inappropriate foreclosures in its review process,” amid concern some lenders have taken improper shortcuts to speed the process of taking homes.

25,000 Mortgages

Of the 25,000 “potentially affected” affidavits identified at the end of the third quarter, all but 2,548 have been remediated or re-executed, the company said.

Ally completed mortgage repurchase reserve settlements with seven counterparties, including a $462 million settlement to resolve claims by Fannie Mae on $292 billion in home loans in December.

The remaining reserves are “primarily” for potential non- government sponsored entities’ claims and related to monoline insurers, the company said. The “vast majority” of monoline claims have been reviewed and considered ineligible for repurchase, Ally said.

The U.S. stake was increased at the end of December when the government converted $5.5 billion of preferred shares into common shares. The conversion increased the book value of Ally’s common stock to about $13.8 billion, a Treasury official said at the time.

Ally, once owned by General Motors Co., averted bankruptcy with the help of three rounds of government aid totaling $17.2 billion. The company is the primary lender to GM and Chrysler Group LLC dealers.

Ally Financial Inc., the auto lender formerly known as GMAC Inc., will sell shares to the public sooner than government officials expected, U.S. Treasury Secretary Timothy Geithner said.

“We’re working very hard with the management and board of GMAC to achieve that outcome,” Geithner said today, referring to an initial public offering, in testimony to the Congressional Oversight Panel for the Troubled Asset Relief Program in Washington. “I don’t know how quickly but it’s going to be much sooner than we thought six months ago.”

An IPO would allow the government to begin withdrawing its support of Ally as officials look to exit bailouts undertaken during the financial crisis, Bloomberg reported. General Motors Co. said today it paid $2.1 billion to repurchase preferred shares owned by taxpayers.

“We are going to move as quickly as we can to replace the government’s investments with private capital, take those firms public, figure out a way to exit as quickly as we can,” Geithner said today.

Ally, the primary lender to dealers at GM as well as Chrysler Group LLC, has benefited from three bailouts totaling $17.2 billion. Michael Carpenter, chief executive officer of Detroit-based Ally, has said an IPO could happen as early as next year.

Ally’s Profits

Ally has posted three straight quarters of profit including a $269 million gain for the third quarter as consumers and dealers borrowed more for car and truck purchases. The company has also shown an ability to sell debt with declining interest rates this year, improving its access to funding sources, said Kirk Ludtke, a senior vice president at the Stamford, Connecticut-based brokerage firm CRT Capital Group LLC.

“Ally has performed well and the capital markets have mended themselves probably faster than the Treasury expected,” Ludtke said today in an interview. “They’ve demonstrated that they can access the capital markets in size and at attractive borrowing rates.”

Ally sold $2 billion of notes at 8.3 percent in February, Bloomberg data show. It then sold blocks of debt at rates of 8 percent and 7.5 percent before completing a $1 billion sale at 6.25 percent last month. During the same period, yields on high- yield bonds dropped 1.21 percentage points, according Bank of America Merrill Lynch’s High Yield Master II index.

Ally was the in-house finance arm of GM before the automaker sold a 51 percent stake to an investor group led by Cerberus Capital Management LP in 2006 for $7.4 billion.

Thor is the world’s largest manufacturer of recreation vehicles, with a U.S. network of approximately 1,200 dealers selling brands such as Airstream, Breckenridge, CrossRoads, Dutchmen, Heartland, Komfort, Keystone RV and Thor Motor Coach.

“We benchmarked current options and needs in the industry and will offer a very competitive wholesale financing product for RV dealers,” said Tim Russi, Ally Financial executive vice president for North American Operations. “Our program is tailored to the recreation vehicle business with attractive terms and flexible credit lines that will accommodate the seasonal fluctuations in RV inventory. We view our retail and wholesale financing, along with remarketing tools, as a full-service offering for dealers.”

Thor RV Group President Ron Fenech said, “Dealer wholesale financing is a critical part of the RV business. We are thrilled to have a strong national lender like Ally stepping in to provide Thor dealers with competitive financing for their inventory.”

Qualified dealers may obtain wholesale financing from Ally Financial for all or a portion of their inventory. Ally Financial has a dedicated sales team devoted to the RV business. Representatives will be on hand next week at the annual Recreation Vehicle Industry Association trade show in Louisville, Ky., to introduce the wholesale financing program.

Ally Financial became the preferred retail finance provider for Thor Industries RVs in April 2010. Ally currently extends retail financing in about 40 states, with plans to expand its RV retail financing nationwide by the end of the year.

Ally Financial will offer its Repair Advantage line of vehicle service and maintenance contracts to customers through Saab dealers, along with a comprehensive suite of ancillary F&I products, including guaranteed asset protection (GAP), lease wear and tear, tire and wheel protection, appearance protection, and theft deterrence. Saab dealers can also take advantage of Ally’s commercial insurance products and services including wholesale inventory insurance as well as access to property and casualty insurance packages offered by third party partners for the dealership.

Ally was previously selected in March as the preferred source of wholesale and retail financing for qualified Saab dealers and customers in North America and internationally.

“Saab is pleased to have Ally Financial as a lending partner for Saab dealers across the U.S,” said Mike Colleran, president & COO, Saab Cars North America. “This relationship offers our dealers and customers more financial options to meet their individual needs. We appreciate the interest and support of Ally Financial.”

“Ally is pleased to build upon its strong relationships with Saab dealers and customers,” said Tom Callahan of Ally Financial. “As a market leader, we provide insurance programs with an experienced and dedicated sales team and leading edge technology. We are confident of our ability to help augment a dealer’s business while meeting customer needs.”

Repair Advantage provides vehicle service and maintenance products that can be tailored to meet the needs of customers. Ally also offers a fully integrated menu selling system for dealers. As an added service, the Ally team will assist dealers in complying with state and local regulations and also provide service and training.