Each month, the Auto Finance News editorial team does a deep dive into a relevant topic the auto finance industry faces in an ongoing effort to provide the most comprehensive coverage to our readers. This year, the industry continued to grapple with the continued fallout of 2020’s global lockdowns and the ongoing pandemic.
Following are the editors’ favorite features of the year:
If 2020 left one legacy to the auto finance industry in 2021, the meteoric rise in used-vehicle values would certainly take the cake. In fact, used-vehicle values in November were still up 43.5% year over year, and 70% from 2019 values. What’s more, vehicle values are expected to remain elevated amid muted new-vehicle production and pent-up demand through at least this time next year, at the earliest.
Supply shortages also rippled across leasing last year, the effects of which are still being felt as 2021 comes to a close. Industrywide, leasing’s share of new financing in Q2 was down 556 basis points when compared with pre-pandemic levels as more consumers extended their leases and OEMs halted promotional programs. Leasing volume has started to claw back, but its growth will hinge on production volumes in the forthcoming year.
The asset-backed securities market has long been vital to many lenders’ capital and funding strategies, and 2021 brought a year of record issuance volumes — yet another pandemic-induced trend. This year, spreads were tight, cost of capital was low, recoveries were high, and investors were hungry for auto paper as credit card issuances dried up in the first half of the year amid depressed consumer spending.
Excess savings, government stimulus, low interest rates and a shift toward digital lending fueled a surge in refinance origination volume in 2020 that has extended through 2021, leading to increased investor interest in the space. Coupled with increased consumer awareness for the product — which is most popular in mortgage — there’s little doubt that refinance will continue to be key in a rising interest rate environment next year.
COVID-19 didn’t only change market dynamics, it changed the way the auto finance industry does business and how it approaches diversity, equity and inclusion strategies, and company culture. As more employees shift to remote working environments, lenders — such as Ford Credit, Santander Consumer USA and Wells Fargo, to name a few — have learned to find creative ways to keep employees engaged while promoting inclusivity, a trend that will continue into 2022.