Podcast: Auto credit performance worsens, prompts provision spike 

 Amanda Harris 0:15 Hello everyone and welcome to the road map for auto finance news. Since 1996, the nation’s leading newsletter and automotive lending and leasing. It’s Monday, September 30th. Now Amanda Harris, joined by Ashley Savage and James Van Bramer. This is our weekly wrap on what happened in auto finance for the week ending September 27th, 2024. In economic news, U.S. consumer confidence fell in September by the highest level in three years. The Conference Board sentiment gauge declined 6.9 percentage points to 90. 8.7 the biggest drop since 2021, according to data released last week. Drivers include the recent slowdown in the labor market and high cost of living. And automotive used EV sales increased 64.4% year over year. Just about 27,000 units in August, while sales of New E vs Rose 12.6% year over year to about 120,000 units, according to data from Cox Automotive EV incentive packages totaled 13.3% of the average transaction price in. August the highest percentage of incentive spending so far this year and 80% higher than the average incentive packages on ice vehicles in automotive finance. Santander Consumer USA is expanding financing for small businesses looking to buy. School vehicles to all of the 14,000 dealerships in the lenders network, the financers offer the program to OEM dealers, which number about 3000 for a while but had demand for small business lease financing from additional dealers. Santander consumer is investing in technology to make the process of applying faster and scale the program across this entire network. Turning to credit performance, delinquencies and losses rose across prime and nonprime securitized auto loans and curl bond rating agencies. August Auto loan asset backed securitization index published September 23rd. The rate of securitized auto loans 30 to 59 days. Delinquent ticked up 14 basis points. Year over year to 1.28% for prime, while nonprime delinquencies rose to 9.46% up 42 basis points year over year. Prim recovery rates increased while non prime recoveries declined largely due to the fact that the loan to value ratio on. A prime loan is typically lower than the LTV on a nonprime loan. Auto finance also increased its provision for credit losses by 25% to $112 million for the fiscal second quarter 2025 ended Aug 31st, according to the company’s earnings release.
Cash finance income fell 14.4% year over year to $115 million, while originations ticked down 1.7% year over year to $2.2 billion. Also last week, we did a deep dive into growth plans and a few auto. Lenders and James has details. So James. James Van Bramer 2:58 Thank you, Amanda. So as Amanda mentioned last week I got a chat with a few lenders who talked about their growth plans as we start heading into 2025. We’re not there yet. We’re already talking about it. I’ll start with Affinity Federal Credit Union. They are in and I quote hot and heavy expansion mode. They are trying to add dealers to their dealership network in the tri-state area, but also in parts of Pennsylvania to ensure that wherever they have a branch, they have partners nearby to do indirect auto leases. The lender S lease portfolio currently sits at 250 million after taking a three-year hiatus from indirect auto leases, which ended in April 2022 when they partnered with the credit Union Leasing of America. The other lender who I will mention is same day auto finance. They are also expanding their dealership network, but in a kind of a different way. They’re actually entering into an entire new area. The Irving based text, the Irving, TX based. Company will expand into Oklahoma at some point in the next year, adding around 11:50 franchise dealerships in the state of Oklahoma as the lender hopes to increase their portfolio to around 50 to 60 million over the next year to a year and 1/2 for ref. Their portfolio was around $20 million at the end of 2023. So obviously they are trying to they’re they are hoping that the Oklahoma. Partnerships will really help their portfolio growth. That’s it for me though. In power Sports, we’re also pleased to announce our annual executives to watch Ashley take it away. Ashley Savage 4:35 Thanks James. You know, as James mentioned, 2025 isn’t quite here yet, but it’s definitely on the mind. Last week we ran our power sports executives to watch nature, which shared 9 power sports finance executives to watch in 2025. These industry leaders are prioritizing customer feedback and satisfaction while embracing a willingness to adapt and adjust a mid market headwind. The future explains how the first half of the year has been a bumpy ride for lenders, manufacturers and dealers in the power sports segment. The funky ride comes after delayed rate cuts by the Fed. Added to affordability concerns that stalled sales and contributed to increased inventory levels. Feature also highlighted that despite those challenges, power sports industry leaders are optimistic about the anticipated recovery of the market in 2025. Last week’s feature cover John Thacker’s appointment as CEO of Yamaha Financial Services on June 24th, annikais contributions to the Rumble on team since joining as CFO in June. Freedom Rd. Financial’s Nat Franklin and his leadership strategies. And Steven Fernald, President and CFO with octane lending and his efforts to diversify the lenders funding strategy and simplify the finance process for everyone involved. I won’t spoil much more, but in case you did miss it, you can find our list of executives to watch, which which shares more on rumble on octane lending. Harley-Davidson Financial Services Camping World and others. On our site. I’ll turn it back to Amanda for some Clos. Comments. Amanda Harris 5:56 Great. Thank you, Ashley. Yes, definitely. Check out the full power sports finance executives to watch feature to see who was named and what they are up to coming into the next year. All right. Well, that will do it for today’s episode. As a reminder, registration is open for the 2024 Auto Finance Summit and Powersports Finance Summit. Returning to Vegas in about a week at this point, so more information can be found at auto finance dot live and thank you for joining us on the roadmap. Be sure. To follow us on X and LinkedIn and we will see you online at autofinancenews.net and here next time.