Podcast: Q3 captive originations are mixed 

Amanda Harris 0:28
Hello everyone and welcome to the road map from auto Finance News. Since 1996, the nation’s leading news on automotive lending and leasing.
It’s Monday, October 28th, and Amanda Harris, joined by Ashley Savage and James van Breimer. This is our weekly wrap on what happened in auto finance for the week ending October 25th, 2024.
In economic news, U.S. consumer sentiment rose to a six month high in October as households were more optimistic about making purchases, partly because of cheaper financing costs following the Federal Reserve’s rate cut last month.
Month, the final October sentiment index rose to 70.5 from 70.1 a month earlier, according to University of Michigan and Automotive News. The Fed’s rate cut has not yet fueled demand for auto sales.
Auto dealers reported that sales mostly softened or held steady midway through October, according to the latest edition of Beige Book, which is published by the Fed.
On performance, credit performance across securitized auto loans continues to worsen on a year over year basis, but improved sequentially according to crowbon rating agencies. Latest auto loan ABS index report.
For prime securitized loans 30 to 59 day delinquencies landed at 1.21%, up eight basis points year over year, but down seven basis points month over month.
Meanwhile, 30 to 59 day delinquencies for nonprime loans came in at 8.93%, which is up 32 basis points year over year.
But they did fall 53 basis points month over month.
Also last week, captives began reporting third quarter earnings showing early signs of mixed results. G and Financials loan and lease originations totaled 14 point 14.3 billion.
3.6% year over year, driven by a 14% year over year jump in lease originations during the quarter.
The captives portfolio inched up 2.5% year over year to 105.4 billion Driveway Finance Corp, which is Lithia Motors finance arm, also originated $518 million in auto loans in Q3, which was up 3.2% year.
Over year, Lithia’s finance and insurance revenue ticked up 3.1% year over year to 360 million, although F and I average gross.
Profit per unit decreased 11.8% year over year to 1803 dollars.
Tesla Finance’s lease portfolio also declined 12% year over year as deliveries were up 6.4% to about 463,000 vehicles and production increased 9% to nearly 470,000 vehicles.
Tesla CEO Elon Musk predict sales to rise between 20 and 30% in 2025.
But much of that will depend on Tesla’s ability to produce more affordable Ev’s.
To a Morgan Stanley estimate that put Tesla sales up 14% year over year in 2025.
We’ve also had several earnings reports in the powersports space, and I will hash it over to Ashley for an update on the power sports market hash.
Take it away.Ashley Savage 3:18
Thanks, Amanda.
So last week we covered the latest earning from a few companies in the powersports space, including Harley-Davidson Financial Services, Winnebago and clearest. I’ll kick us off with a quick Harley-Davidson update before getting into Winnebago and then wrapping it up with Polaris. But for Harley-Davidson, Finan.
Services annualized retail credit losses increased in the third quarter, while North American retail sales fell by double digits. When it comes to HDFS originations, we didn’t get an exact number for Q3, but Chief Financial Officer Jonathan Root did say during.
Company’s earnings call last week that retail originations declined 11% year over year in the quarter, the company’s retail finance receivables totalled 7 billion in Q3, unchanged year over year and quarter over quarter on the RV and marine side, manufacturer Winnebago Industries increased its promot.
Liabilities in the fourth quarter of its fiscal year amid larger efforts.
Excuse me to meet dealer and consumer needs in a challenged retail environment.
Winnebago’s promotional liabilities grew 1.7% year over year to 30.4 million in the fourth quarter.
Which ended Aug 31st. Our teams analysis of the company’s filings indicated that promotional liabilities rose 47.6% sequentially.
Winnebago CFO Brian Hughes said on the earnings call quote to support dealers in moving inventory and create stronger incentives for customers. Discounts and allowances remained elevated in the quarter, pushing gears a little bit, but for Polaris sales worsened in the third quarter following the company’s efforts to.
Reduce year end production and shipments by 15 to 20%.
Polaris Isceo Mike Speeton was quoted on the earnings call, adding that while these actions negatively impacted our short term results, they were a necessary move to support our strong partnership with dealers.
Old Firm our commitment to reduce dealer inventory.
Blair is the third quarter sales totaled 1.7 billion, down 15% sequentially and 23% year over year.
We can also share comments that I think reflect sentiment shared across the powersports industry and that the September, September rate cut by the Federal Reserve was quote, encouraging, but ultimately has not had any immediate impact on retail sales or demand.
That’s all I have on the powersports front, but we also hosted the 2024 Auto Finance Summit in Las Vegas earlier this month.
I’ll pass it to James.
Discuss some of the key themes from the event.James Van Bramer 5:30
Thank you so much, Ashley, on that last point, you made the prevailing sentiment at this year’s Auto Finance Summit was optimism for what to come. In 2025, auto executives are optimistic for a few reasons.
I’ll start with one.
Which ash just mentioned, which is last month’s interest rate cut from the Fed, which is expected to be the start of what’s to come as they as we expect more to come this year, the auto industry faced dueling challenges right of high car prices.
And elevated interest rates making borrowing more costly for consumers.
Into next year, as more as more cuts are on the way and needed actually to lower those consumer monthly payments, better loan terms will come.
But they won’t be a silver bullet for improving affordability, submod executives say.
But there are areas in the market that do signal that price relief is on the horizon. For example, inventory levels are up, which means there’s a likelihood for more incentives, which will also provide optimism for the auto industry.
Onboard specific note, we also heard industry leaders.
Strike optimistic tones on E vs headed into next year.
The upshot was that adoption has improved and actually hit a record level of new, and EVs actually had a record level of new sales in September at 9%.
Adoption may not have reached the levels that some predicted.
A few years ago, but few seem to doubt that E vs are in fact the future of the automotive industry.
However, tax incentives remain a crucial part of EV adoption.
Execs at the conference said.
Values remain a concern just to show just to provide one example, Scott Painter, CEO of EV subscription provider Autonomy, said that it will be impossible for companies like us to own these assets without having a residual value guaranteed.
Lastly, technology was once again top of mind for credit. For example, is launching a new platform next year to figure out when best to reach a customer based on their purposes and when they are. When the best time is to reach that customer.
The industry’s a clear message at AFS this year that the future of auto finance includes technology.
With that, I’ll pass it back to management for closing comments.Amanda Harris 7:43
Yeah, definitely.
And just to tease, we’ll have spotlight go up today with one of our firesides.
Oh, Bank of America on the show.
Optimism was definitely part of that technology, a part of that as well.
So clearly a theme that is continuing to come up in the industry, and I’m sure those themes will all be prevalent next year as well.
So we’ll following all that, but that will do it for today’s episode.
And thank you for joining us on the road map. Be sure to follow us on X and LinkedIn and we will see online at autofinancenews.net and here next time.