Ally's auto delinquencies rise in tandem with originations

• Key insight: Ally's auto-lending business continues to grow, but rising delinquencies in newer loan vintages point to financial strain among some borrowers. Executives say credit performance remains within expectations and are monitoring economic conditions closely. 
• Supporting data: In the third quarter of 2026, 4.02% of Ally's auto loans were at least 30 days past due, up from 3.93% a year earlier.

Ally Financial saw both originations and delinquencies in its flagship auto-lending business rise in the third quarter, highlighting conflicting signals about consumers' financial health.
During the company's earnings call Tuesday, Ally executives emphasized that consumers remain resilient despite persistent affordability pressures. However, they acknowledged that loans originated in late 2025 and early 2026 are showing higher early-stage delinquencies, a trend the $203 billion-asset company is "closely monitoring."

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In the third quarter of 2026, 4.02% of Ally's retail auto loans were at least 30 days past due, up from 3.93% a year earlier. The share of loans at least 60 days past due rose to 1.10%, up from 1.03% over the previous 12 months.

Russ Hutchinson, Ally's chief financial officer, told analysts that the company's 2025 and 2026 auto loan vintages are performing worse than its 2024 vintage, but not necessarily worse than expected.

"We are seeing elevated delinquency in some of the late '25, early '26 vintages. A lot of that is just reflecting the credit content that's in those books," Hutchinson said on call. "Nothing we're seeing gives us a ton of concern right now."

Hutchinson said Ally is monitoring several economic indicators and adjusting its underwriting accordingly.

"We're looking in particular at gas prices, at general affordability and inflation, at personal savings and real wage growth," he said.Net charge-offs totaled $423 million in the third quarter, up from $395 million a year earlier. The annualized retail auto net charge-off rate edged up to 1.89% from 1.88% in the same period last year. 

Truist Securities analyst Brian Foran said in a note that despite Ally management's efforts to downplay concerns about credit deterioration, the issue remains a source of unease for investors.

"This remains a hang-up for many investors, as this quarter did mark a shift from year over year credit metrics being down to being up," Foran wrote.

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Despite rising delinquencies, the Detroit-based auto lender reported $12.9 billion of consumer auto originations in the third quarter, up 10% from a year earlier. Consumer auto loan applications rose 20% year over year to 4.8 million.
Notwithstanding high inflation, the strong growth in applications suggests that consumers generally remain confident in their ability to manage debt, though Ally is also working to increase its market share.

Hutchinson noted that Ally sees further opportunities to expand origination opportunities.

"We continue to benefit from our strategic efforts to align dealer incentives to drive record application flow. Sustained strength in application volume remains a key competitive advantage, and we continue to believe there is runway ahead," he said.Ally's profit rose during the third quarter, with net income increasing to $433 million from $398 million a year earlier. Earnings per share were $1.30, on par with the consensus of analysts polled by S&P Capital IQ. Adjusted earnings per share of $1.34 were slightly above analysts' consensus estimate of $1.33, according to a Jefferies note.

Total net revenue reached $2.33 billion, up from $2.17 billion a year earlier.

The bank's net interest margin, a measure of the difference between interest income earned on loans and interest paid on deposits and other funding, rose to 3.62% from 3.51% in the same period last year. Ally updated its full-year net interest margin guidance to between 3.60% and 3.65%, with the top end of that range slightly lower than in the company's previous guidance.

Noninterest expenses totaled $1.236 billion during the third quarter, roughly flat a year earlier. Ally expects its full-year noninterest expenses to be between flat and up 1%.

Ally's management also addressed the rise of AI agents during the earnings call, saying the technology is worth monitoring, and that educating customers about potential risks remains important.

In recent weeks, there has been concern in the banking industry that consumers will use AI agents to move their money to banks that offer the highest yields. Ally operates an online bank.

"We're spending a lot of time watching that and monitoring activity," Hutchinson said Tuesday. "I think we've seen activity, but it's actually been quite low."

Hutchinson said Ally is educating customers about credential sharing and the risks associated with it. "This is a watch and monitor, and I'll say the tools for price discovery are nothing new," he added.