General Motors' recent announcement that it will be selling more than $1 billion dollars worth of preferred stock in Ally Financial is the latest development in a tangled web of mergers and acquisitions that has left the auto lending industry quite different from what it was years ago. This can be a bit confusing for borrowers, so its worth sorting out where all the loans are coming from.

The first step to understand is that automakers frequently use what is known as "captive lending arms." These are essentially subsidiary companies that solely focus on auto financing rather than the production and sale of vehicles. Perhaps the largest and most famous of these was GMAC, which handled all of the in-house loans for GM customers. Many automakers can actually make more money off of loans than they can selling vehicles, and for this reason its highly desirable for an automaker to own a lending company.

GMAC was sold to a group of investors in 2006, but GM retained a share of the company and they continued to work closely in the lending business. After the economic collapse took its toll on the automotive industry, both companies accepted bailouts from the federal government. GM was able to bounce back from this disaster more quickly than GMAC, which later rebranded itself as Ally Financial.

With the credit market thawing and more automakers beginning to offer car loans to drivers with subprime credit histories, GM was in need of a captive lender again. Some analysts thought that the company would look to reacquire Ally, but instead the automaker acquired independent lender AmeriCredit in a deal valued at $3.5 billion. This left the company's partnership with Ally somewhat in jeopardy, as the financier continued to provide loans at GM dealerships nationwide.

The most recent news is that GM is selling off all of its preferred stock options in Ally, and appears to be fully supporting AmeriCredit as the new lender of choice. GM still owns approximately 10 percent of Ally through common stock, so it's unlikely that their partnership is completely over. The use of AmeriCredit is somewhat preferable for borrowers with bad credit scores, as the company has historically been more open to subprime lending than Ally has.

Despite the split, Ally will likely continue to be a major force in the auto lending market. The company recently reported its fourth-straight quarterly profit, and appears to be looking to launch an initial public offering and pay back the government later this year.

Of course, borrowers should research all options when looking to acquire an auto loan. Banks, credit unions and dealerships may all offer terms that are preferable to the loans from the major automakers.