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Auto lenders seeing less of a price drop than feared

Car Prices Are Still Falling But the Sky Isn’t as Lender Profits Rise

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Auto lenders that sounded alarm bells about slumping car values are seeing less of a price drop than feared. Proof of the reprieve — however short-lived — is showing up in their profits.

Ally Financial Inc., the bank that gets most of its revenue from auto loans, saw record adjusted earnings in the second quarter. General Motors Co.’s finance arm reported all-time high pretax profit in the period, and Ford Credit’s was its best since 2011.

This is not the tune auto lenders were singing at the beginning of the year, when a surge of vehicles with expiring leases was sinking used-car prices and roiling earnings. The weak underlying market dynamics are still there — more than 3 million vehicles will hit the used-car market this year, a third more than in 2016, according to J.D. Power. But with used-car values holding up better than expected, banks and captive finance companies avoided taking the hit from vehicles being sold at depressed prices.

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