Ally IPO opens new options for subprime car loans

Ally Financial’s initial public offering last week benefits dealers because Ally expects to be able to compete more aggressively for subprime business after it sheds government ownership.

“Our cost of funds will diminish” without government ownership, Ally CEO Michael Carpenter told Automotive News in a phone interview on April 10.

Ally is moving on several fronts to lower its cost of funds, such as paying off older, higher-interest debt. Another one is dropping government ownership, which imposes an extra layer of regulation. After the IPO, the U.S. Treasury still owns 17 percent of Ally, down from 37 percent before — a holdover from the auto industry bailout in the last recession.

Ally shares started trading on the New York Stock Exchange on April 10. That makes it far easier for the government to sell its remaining share. The IPO last week consisted of 95 million shares belonging to the U.S. Treasury. The offering raised about $2.4 billion for the government.


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