Ally Financial (ALLY) Plunges 0.83% to 2025 Low as Delinquencies Rise, Subprime Exposure Weighs

Ally Financial (ALLY) fell 0.83% Thursday, hitting a new low since September 2025, with an intraday decline of 1.10%. The selloff reflects growing concerns over deteriorating borrower financial health, rising delinquency rates, and broader macroeconomic pressures. The auto lender’s exposure to subprime borrowers has amplified its vulnerability amid a weakening employment market and elevated living costs, as highlighted by its chief financial officer.

High inflation and rising cost-of-living pressures have strained borrowers’ ability to meet loan obligations, particularly for those with lower credit scores. Ally’s CFO noted that these challenges are compounded by a "weakening employment picture," which has increased credit risk across its auto loan portfolio. Delinquency rates in this segment rose by 20 basis points in July and August 2024, exceeding expectations and signaling ongoing stress for the company’s core business.

Rising net charge-offs, which measure unrecoverable debts, further underscore the fragility of Ally’s loan portfolio. The company has proactively increased reserves for potential credit losses to buffer against future risks, a move that highlights its cautious stance amid deteriorating borrower conditions. Analysts have raised concerns that Ally’s struggles could indicate broader systemic risks in the consumer finance sector, particularly for institutions with similar exposure to subprime lending.

The auto loan segment remains a critical area of focus, as Ally holds billions in debt tied to borrowers with weaker credit profiles. Rising delinquencies and charge-offs in this area reflect the sector’s sensitivity to economic downturns. While the company has taken steps to reduce risk—such as divesting its Ally Lending arm—external factors like inflation and employment instability continue to weigh on its outlook. The recent volatility in Ally’s stock price underscores investor wariness about its credit risk exposure and long-term profitability in a challenging macroeconomic environment.