LAS VEGAS – Vehicle financing began humbly in the 1900s with simple offerings to help auto makers sell cars.

“There were 12- to 18-month retail installments, and that was about it,” says Jim Kucharski, Ally Financial’s vice president-alliance sales.

Now finance companies offer an assortment of products including loans of varying terms, leasing, finance and insurance products, dealership floor planning and loans for dealers upgrading their facilities at the behest of auto makers.

“It is a very broad set of services compared to what was originally offered,” Kucharski says here at the F&I Conference and Expo. “It is all driven by demand.”

One of the newest products is his firm’s Ally Balloon Advantage. Ally Financial begins offering it in New York and California, then elsewhere in the coming months.  

Ally Balloon Advantage is a retail-installment sale contract with reduced regular payments in exchange for a larger balloon payment at the end of the loan. Consumers can choose from financing terms of 48 or 60 months. 

The program is available for new-car purchases through General Motors, Chrysler, Mitsubishi and Suzuki dealers and through all dealers that finance used vehicles with Ally. 

Most used vehicles less than four model years old are eligible. Certain F&I products such as vehicle-service contracts qualify, too.

“Ally Balloon Advantage is ideal for consumers who prefer to own their vehicle and have reduced regular payments with a larger payment at the end of the term,” says Tim Russi, Ally Financial’s executive vice president-North American Operations.

Although the end-of-term value of the vehicle can vary based on market factors, the goal is for the scheduled balloon payment to approximate the expected value of the vehicle at that time, he says.

Russi adds, “Dealers may choose to offer a limited trade-in guarantee with Ally Balloon Advantage contracts to build customer loyalty, and manufacturers may consider incentives for both new and certified pre-owned vehicles.”

Such products debut as lenders step up competition and auto sales recuperate from the “quick, dirty and hard meltdown” years of 2008 and 2009, Kucharski says. Despite a choppy post-recession recovery, “We are on the right trajectory with the auto industry leading the economy.”

He credits auto makers with keeping supply in line with demand, a practice that wasn’t followed in past years. “OEMs are much more consistent in how they are producing vehicles. They are showing self-discipline, a good trend.”

Auto-financing processes at dealerships are improving as consumers return, many of them with high expectations in part because of access to abundant information on their iPads and such.

Kucharski cites these trends and industry lessons learned:

  • Customers with good credit expect to be pre-approved, “which can really close a deal.”
  • “Dealers learned, some of them the hard way, that cash flow is paramount.”
  • Pent-up consumer demand to replace their current vehicles is tremendous.
  • Payback terms for auto loans are stretching out again in attempts to lower monthly payments. Seven-year loans, once popular and then frowned upon, are regaining popularity. “We hear whisperings of 96-month loans,” Kucharski says.