Will Ally Financial Inc (NYSE: ALLY) Financing Deal with DriveTime Payoff?

Ally Financial Inc (NYSE: ALLY) recently announced a financing deal with DriveTime, which is the second largest vehicle retailer specialized in selling used cars within the USA. According to the details of the partnership provided by Ally, the company committed to purchasing DriveTime’s retail contracts for the next 12 months in a deal valued at $750 million.

Article Summary

Ally Financial recently announced a financing deal with DriveTime.

The company’s performance is rated highly by most analysts for 2018.

The company is growing most of its divisions given the favorable economic conditions.

Here’s the trading report on ALLY.

Many analysts have rated Ally Financial a strong buy with a positive outlook for 2018 despite the fact that its stock rallied by 49% last year. Although there were concerns about an oversupply of used cars in the US this year, these fears are unlikely to materialize given that last year’s hurricanes such as Harvey and others destroyed about 500,000 cars.

The company also has one of the biggest retail deposit franchises totaling about $75 billion, which has allowed the company to replace high-cost debt with bank deposits. Most of Ally’s revenues comes from its auto financing with the firm generating about $300 million in pre-tax income from its auto division in the last quarter.

Given Ally’s wide experience and deep understanding of the auto financing market, it is highly likely that the deal with DriveTime will payoff for the company. The company is also expected to grow its Ally Bank, Ally Invest and Ally corporate divisions as well as its home loans business given the existing favorable environment for most financial services companies.

DriveTime is set to benefit immensely from the deal with Ally since the arrangement will allow the company to diversify its retail and finance platforms in order to gain access to the near prime consumer segment. The deal will also allow DriveTime to grow its originations based on Ally’s innovative financial products.

Ally’s 2018 outlook appears promising as the company expects to grow its award-winning online bank, its auto-insurance business, its digital wealth management platform and its online brokerage platform among others.

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