NEW YORK — Ally Financial addressed speculation that it might venture into more subprime auto lending. The company reiterated to SubPrime Auto Finance News about its decision to concentrate on the prime segment.

However, Ally explained how it approaches borrowers who might fall into the nonprime space.

"Ally Financial's strategy is to extend credit using sound underwriting criteria and responsible financing practices," Ally spokesperson Sue Mallino wrote in a statement to SubPrime Auto Finance News on Thursday.

"We accept retail auto contracts through the full credit spectrum — including nonprime — as a normal part of our business," Mallino continued. "We place greater emphasis on the higher end of the nonprime spectrum, and we only approve credit for qualified customers who demonstrate the ability to pay."

Ally responded to a wire report from earlier this week that contained commentary from a host of Wall Street analysts who honed in on a single comment by company president William Muir.

According to published reports, Muir described subprime auto lending as "a very attractive business today." Muir made the statement when Ally released its preliminary first-quarter results on May 3.

With an initial public offering on the horizon, stock market analysts believe Ally likely needs to delve into more subprime and used-vehicle lending in order to boost profits, the report indicated. They cited data from Experian Automotive about the differences in interest rates between prime and subprime borrowers.

Experian's data from the first quarter of this year showed the average interest rate for prime customers was 4.95 percent on new vehicles and 7.04 percent on used units, the report stated. Meanwhile, the subprime averages were 10.38 percent on new models and 14.64 percent on used vehicles.

Furthermore, Experian's analysis revealed while Ally held the top market position among all new-vehicle lenders, the company also has the No. 2 spot in used-vehicle lending, expanding its penetration into the segment by more than 85 percent year-over-year.

"If Ally wants to achieve the kind of growth shareholders will be looking for, it has to look beyond the business of prime loans," said Gimme Credit's Kathleen Shanley, one of the stock market analysts quoted in the wire report. "This segment of the market is extremely competitive; hence the company's increased focus on used cars and nonprime buyers."

Recap of Ally's 1Q Performance

In reporting its preliminary first-quarter results, Ally announced early last month that its auto originations from continuing operations soared 75 percent for the first quarter to $14.3 billion, compared to $8.2 billion in the previous year.

As reported in SubPrime Auto Finance News, first-quarter consumer originations included $9.6 billion in new originations, $2.5 billion in used originations and $2.2 billion in new leases. The first quarter of 2010 included $6.2 billion of new originations, $1.1 billion of used originations and about $800 million in new leases.

"Growth in consumer financing originations was driven by the expansion of the company's retail originations platform, strong dealer relationships and the execution of incentive programs designed by GM and Chrysler," management explained.

"Leasing and used origination volume continued to increase as Ally remains focused on diversifying its business mix under prudent underwriting principles," the team continued.

More specifically, leasing grew to 16 percent of total originations in the first quarter from 10 percent in the same period of last year.

Moreover, used originations increased to 17 percent of total originations, compared to 14 percent a year ago.

Ally's average U.S. wholesale penetration for GM dealer stock was 82.3 percent for the period, compared to 81 percent in the previous quarter and 84.2 percent in the first quarter of 2010.

"U.S. consumer penetration for GM was 51.9 percent during the first quarter of 2011, compared to 49.7 percent in the prior quarter and 33.5 percent in the first quarter of 2010," according to Ally.

As for Chrysler, Ally's wholesale penetration was 69.9 percent, compared to 71.6 percent in the previous quarter and 71.4 percent in the same period of 2010.

Chrysler's consumer penetration was 33.7 percent in the first quarter of 2011.