Senior executives from some of the nation’s largest auto financiers gather to discuss the industry’s trajectory and strategies for overcoming looming challenges and the dynamic credit cycle. Panelists: <ul> <li>Shawn Allgood, Head of Chrysler Capital & Auto Relationships, Santander Consumer USA</li> <li>Pete Carey, President of Mazda Financial Services, Toyota Financial Services</li> <li>Kevin Cullum, President & Chief Executive Officer, Nissan Motor Acceptance Corporation (NMAC)</li> <li>Duane Freeman, National Sales Executive, Consumer Vehicle Lending, Bank of America</li> <li>Renee Horne, Vice President of Consumer Lending, USAA Bank</li> </ul> Moderator: JJ Hornblass, Chief Executive Officer, Auto Finance News [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box">JJ Hornblass 00:00 Pete Carey president of Mazda financial services at Toyota financial services. Kevin Cullum president and chief executive officer of Nissan Motor Acceptance Corp. Duane Freeman national sales executive, consumer vehicle lending at Bank of America. And Renee Horne, Vice President of consumer lending at USAA Bank. Welcome to all of you. ThePete Carey 00:27 Good morning. Good morning. Good.JJ Hornblass 00:31 Morning. Thanks, Pete. So there is let's we're gonna split this conversation into generally two parts, really talking about the market. And then also how each of you have been addressing the the current state of affairs and how you see things moving forward, also for your for your venture. So let's start with the market and set the stage. We saw some good news from some lenders this week, in terms of their financial performance in three Q. And there seems to be a rebound in originations, and that that rebound is coming, perhaps quicker than in the previous cycle. So let's kind of get into that a little bit. First of all, is that what you're seeing in the marketplace? Do you see this as well? And how much of this is sustainable? Or are we just pulling forward? demand? Perhaps? And maybe for this first round, we'll go alphabetically? if that's okay with everyone, which means, Shawn, you're up.Shawn Allgood 01:53 Thanks, JJ. And good morning, everybody. So, you know, I think, you know, I think a lot of people are seeing exactly what you're saying. And it's just a quicker return than any of us candidly ever expected. In a lot of ways, I think it speaks to the resiliency of this industry. And we've seen it many, many times in the past. I honestly, I think this is a little bit of a release of some built up demand. I think that people who were in the market to buy a vehicle pre COVID have decided they're tired of waiting, feel like the industry is ready, and they're out there shopping, I think there are people who don't want to take public transportation or picking up vehicles. You know, I think the key for all of us as lenders is to stay close to our dealers at this time, because I think the business models for dealers are changing. I think our business models are changing. And I think we all have to stay very, very in tune. And I think if we do that we're going to continue to see a bullish market for auto sales and auto finance. JJ Hornblass 02:47 There's there's a lot to unpack there, Shawn. But if you can, if you can just sort of hone in on on kind of like your the current situation that you're seeing. I mean, when you say that it's a little bit more bullish than you expected or was expected? What what what does that mean to you? Like, you know, what was the expectation? Shawn Allgood 03:10 Yeah, so if you had asked me in April, you know, where we would end the SAR for for 2020. I don't think I would have ever come up with a number anywhere close to 15 million. And so I think what's happened is, is we've got a very booming used car market, because new car inventories are down. So you have high demand there from consumers. And And quite frankly, I think the OEMs have done a really good job with incentives and attracting people back. And so you know, I think as we kind of see this, this V spiker, this hockey stick spike up in sales, I think we're all we're all flourishing in it right now. So from my perspective, having consumers and market and a lot of them are financing vehicles tonight. JJ Hornblass 03:51 Is that how you see things from your standpoint? Pete Carey 03:57 Yeah, I think short term resiliency is one that all focus on I think. Now, April May very difficult with the factory shutting down, consumer demand contracting. And then quite frankly, we ran out of cars, the ground stock was depleted. I think the supply chains and the factory rallied around in back online and and now as I drive test dealerships I visit dealerships that seems to so the dealers have cars, I think in the interim, the dealers, frankly made a fair amount of money holding growth. So they're feeling good about the last couple months from a rebound perspective. But I would also say that I think the dealers are finding new ways to attract customers. I think the online digitization of all things is finally something that's going to have some permanence. And, you know, I think I think to some degree, you know that that affects the way we advertise the way we incentivize where where customers are willing to transact. All of those things have changed and more. And I think the one of the dealers that were progressive in those areas with those capabilities are benefiting. And there's a lot of dealers that are playing such as JJ Hornblass 05:24 Kevin, as, you know, sort of sharing, you've heard from Pete, who's, you know, from his captive perspective, share your captive perspective. Kevin Cullum 05:37 Thank you. Um, yeah, you didn't say, Kevin? Right. I just want to make sure we jump in there. So yeah, no, I think every Captain has their unique challenges with regards to the market. Obviously, it's very driven by our parents and availability of inventory, the launch of new models, things of that nature. So it's going to vary a bit from capital to capital as to whether things are up or down or stable. And in our particular case, you know, things are better than we expected. It I mean, when you think about it, though, consumer, finance, auto finance lender, I mean, right now is it as long as you haven't personally been impacted dramatically by the, by the crisis, and now's a great time to buy a new car, and you've got rates at an all time low, which is always a benefit for any manufacturer or lender, because you can offer you can use the incentive money you're having, that you have available, it goes a lot further and, you know, customers love zero percent. So, you know, offering zero percent is relatively affordable. And it offers a great opportunity to take advantage of the new products that are available. In addition, the fact that use cars are seemingly at an all time high in value. So trading in your vehicle, it's a win win, you get maximum price for the used car, you get the best structure of the New Deal going forward. And we're seeing that, that happens a lot. You know, it's a very positive situation that we're able to develop and get a win win, both for the manufacturer and the consumer. And ourselves, obviously, zero percent, incentive type of programs are very, they perform extremely well, customers are very happy. And that portfolio performs well. So that's what we're saying you think it's going to continue? Obviously, for a while rates aren't going anywhere. And as the new vehicles start to ramp back up for inventory, I think that that that trend will continue? JJ Hornblass 07:42 And do you think you have some I mean, there we can we'll maybe get to this a little bit, but there seems to be more pricing power in the market, then we probably, you know, we'll certainly we all expected back in, you know, whatever, April or so. I mean, do you think that that, you know, would you expect to, to use that pricing power, perhaps coming into 2021? And maybe not necessarily extend zero percent as extensively as as maybe you have? Kevin Cullum 08:23 yet? Well, answer your question. Yes, I do believe it's going to continue. The pricing power, really, I think sits on the dealer side, more so than our side, I mean, the end of the day, like I said, with rates as low as they are borrowing costs as low as they are zero percent doesn't really cost much. So offering that as an incentive is actually very affordable, it's a good use of incentive money that's available, incentives are never going to go away. So you know, I think it'll help control the VME spend, keep the game yars in check, and drive better transaction pricing for the dealers and for the manufacturer. So I think that that's going to continue, you know, the one area that we've seen, you know, that hasn't been as robust is leasing, leasing market has not bounced back, where, you know, to where it's been in the past. And, you know, I think no one ties I think much more to, to the pandemic because, you know, at least customers, I think are have options. I think they're a little more conservative generally. And we haven't seen the robustness on Elisa, as we've seen on the retail side. And maybe that's account, you know, an impact of the values as well, but I think that we're kind of seeing 21 as we come into the end of into 21. We see the leasing market, actually starting to rebound a little bit more and the retail market kind of continues to shrink. JJ Hornblass 09:54 Duane, what's your what's your perspective from the bank side effects How do you see how do you see the market? And, you know, kind of what's your reaction to what Shawn, Pete and Kevin have shared with us? Pete Carey 10:10 Yeah, thanks, JJ. And thank you for putting this on. You know, it's crazy 20 years and the first virtual event, it's really good to be here today and have a chance to speak to the industry. You know, I think from back America's point of view, gosh, we learned a lot, right? You go back to March, when we hit that trough, and the pandemic was first came out, car sales plummeted. government shut down, but fewer shut down. And then you had this creativity that started almost instant reviewers tried to adjust to the new normal market reality. And then you had, you know, one of the largest providers or secures a fleet sale person goes bankrupt. And then all the scare of what that brings in, what is fleet sales versus retail sales mean around the news car supply. So we all went immediately gets really concerned about the plummeting values of cars. And then slowly, like every single month after that just gets a little bit better. And I think you really have to put that on the creativity of the dealer to perform in whatever market gets thrown at them. I know dealers, in the last few months have made historic amounts of revenue and profit. And we are seeing that come through now to where it's helping dealers adjust to new expectations for the client, whether that's digital, aware, the sale takes place. And all these things are impacting how we need to go to market in order to make sure we win our fair share. Certainly the the number of variables that you think about from a forecasting perspective, how we just haven't tried to think about 2122 23. It's really hard. It's really hard right now, there's just so many variables, we'll be talking about the election, certainly not going to predict what's going to go on there. But that's going to have an impact that will have a material effect. What's going to happen with rental car companies, and how they secure vehicles. And what does that do to supply? What is the dealers really need to do to complete a true end to end digital experience for the client? Because clients are saying they want, they want transparency, they want control, they want pricing, transparency, all of those things? And how do we adjust as a market to win and deliver for what the client wants and what the dealer said? It's a very, very interesting time. JJ Hornblass 12:45 Again, when you when you kind of take in this, as you say, kind of a incremental improvement that you've seen in the marketplace over the last couple of months or so, I mean, does does the bank have a greater appetite for assets? I mean, are they is to what degree is that playing into kind of underwriting perspective? at Bank of America? Pete Carey 13:13 Yeah, no, I think it's a great question. One of the things also we want to be we want to deliver for our clients. So we're very focused around what's the client need and experience, and continue to focus on that through our direct platform and referring and connecting to the viewers in that manner. But I honestly think that it's, it's, it's hard, it is hard to know exactly. What what the needs are going to be at the market from from that perspective. JJ Hornblass 13:46 And they, you you've been, you've had your You're lucky that you can go last in this in this particular round. So you've heard a lot. I'm I'm guessing that there's some of what you've you've heard from your fellow panelists, 14:01 you agree with JJ Hornblass 14:03 some of what you've heard, maybe you have a different perspective on, you know, what's the USAA perspective? Sure. Great Renee Horne 14:10 to be here. Good morning, everyone and esteemed colleagues. And good to see you again, JJ, I'd say without being repetitive. I'm saying a lot of the same trends that my colleagues here on the panel are certainly the episodic nature of the past few months. It's been something unlike any other recession, if you will, with less predictability and certainly a lot of volatility in terms of the variables that are playing into this one. Just the quick rundown, I think. You know, certainly there was pent up demand when SARS hit a slump in the early spring. There was pent up demand which we saw. We even saw a shift if you will, away from mass transit air travel for obvious reasons, but during the summer vacation months, we also finance RVs and other leisure vehicles And we saw an uptick, unlike previous years. And so that that indicates a preference for more private mobility. And so I think we'll continue to see that, obviously, we we saw what happened with the zero percents and new car financing as well, a majority of our membership, of course buy used or Pre Owned. But that's certainly been a trend. And I think the nature of being a digital First Bank, the emphasis which does play to our strength, we don't have branches or anything like that we are purely direct lender. That's certainly a trend, I think we'll continue to see even coming out of the pandemic. I think lenders in general dealers and the relationships across OEM will collectively have to reimagine the way alone is issued, funded, etc. And, and one thing I will call out related to the incentive offers and just in general, in terms of some of the trends that I'm seeing more broadly on a macro level, that I believe we should keep an eye on and maybe even be cautious, because while there's a lot of cautious optimism, if you look over the last five years, the average loan vehicle price for new has gone up 26 and a half percent, the average vehicle loan amount for a used vehicle loan has gone up 12% in the past five, five years. And just in the last quarter, they've continued to go up by I think meaningful or material amounts. Now. With the zero percent offers out there, what that does, particularly on of course, new vehicles is for those that need a lower car payment that still want, you know, a luxury or a higher price vehicle, they can get into those longer term loans. The bloat on 73 plus month loans has gone up 300% year over year, in the industry as an example. The or sorry, the Yes, year over year for the past quarter. And the the caution there is when you think about higher dollar amount loans granted over a long period of time, there's potentially the risk of negative negative equity. So I think it's just something we continue to watch. And, you know, the stimulus payments that came through the the uncertainty around and another stimulus Still, if you will, obviously, along with just deferments in terms of payments, I think, have suppressed delinquencies, so I just think we should be cautiously optimistic and keep an eye on those things. JJ Hornblass 17:45 The, you know, some of that those used market trends are related to what's going on on the new car side where you're at a nine year low for inventory, I believe it was last month. So to the sort of the three captive panelists to be Kevin and Sean, what is what is the expectation on the inventory side? And, and help us understand where it kind of tips visa v what Rene is saying. So it does, does it? Where does Where do inven inventories need to get to, in order for this this kind of imbalance to rectify? Um, who wants to take a first crack at that? Shawn Allgood 18:37 Yeah, I mean, I'll take a shot. And then Kevin can correct me because I'm sure I probably get it wrong. But you know, I think you know, you look at dealers inventories, and they've never been happy with their inventory, they normally will run 90 to 120 days supply. And they'll never have the right mix of vehicles and the dealer, the factory is always trying to give them more cars. And so through this pandemic, they've all been forced operate, you know, now in 60 to 70 days supply of vehicles. And I think, you know, the phone goes off the back of a truck or selling vehicles that are going to arrive next week. And in my opinion, it's creating more decisive customers, you have customers that no, there's not seven red pickup trucks, the one pickup truck they want is sitting in front of them. So look at it. From my perspective, I think the reduced inventory is a positive thing. The tip I think is when the factories finally get to the point of catching up, which is probably going to come when they can run at 100% across all they're factors. And maybe that's mid next year. But I think I think the factories as well as the lenders are learning a lot through this process in terms of what inventory needs to be. We're running a really strong SAR with 60 or 70 day supply of vehicles on the ground and maybe the right number 75 and maybe we bounced there as an industry. 19:52 Everybody. 19:55 Oh, go ahead. Go ahead. Kevin Cullum 19:58 Yeah, okay. No, I would agree with that I, you know, if the old adage, there's always one car too many or one car, not enough, I mean, you know, hitting that nail with the dealers is difficult. Ideally, I think every manufacturer and every dealer group wants to run a 70 day number that's, that's, that's a magic number, return on sales, I think right at this point have never been higher, because of the low inventory and the low rate associated with it, inventory and return rates are really strong. So, you know, maintaining that would be the goal, I think that we would all have, and certainly the plan that we want to have, the challenge is going to be whether or not you have the right mix, whether you you know, from a manufacturing perspective, you you stay on time you keep you don't have issues with the supply and, and whatnot. And right now, you know, they're running, I mean, when you shut down the industry for a few months, it takes you a while to catch back up for the entire supply chain. So I don't expect inventories to be an issue for a while. on the high end, I believe they're going to be an issue on the low end, as demand convict continues to be strong, we're going to hear a lot about the fact that we need more of this, and we need more of that. So you know, and again, he can then a big driver of manufacturing volume has always been the fleet industry as well. And with rental rental companies, you know, struggling, struggling in this environment. As long as they continue to struggle there, their demand is going to be down, which will provide more than enough capacity for the for the dealer. So, you know, I see that the the inventories are going to stay pretty much in check, at least for the next year. if not longer, at least, that's the objective that we have at Nissan. So that's that's the plan. Pete Carey 21:48 On in the 30 years, I've been doing this, I've never remember so many different dynamics that were in play at same time, used car dynamic in particular, which makes us all look smart or silly, depending on where it is. Managing portfolios over a five year period has been incredibly strong. But we're starting to see that normalize some degrees at the auction. I think used cars were being leveraged to augment inventory, just in general terms, dealers didn't have new cars to sell. A lot of they had to sell something. So they were having up on sweets, and other other options that were available at the auction. As as inventories get replenished, that demand for those used cars is starting to somewhat normalized. But I would say that prices are so higher, we're selling cars, lease returns and making money, which is very rare in our industry. So we'll have to see how that all plays out. I think Rene brought up a great point. We've been chasing this extended term financing and affordability in general term. Problem is consumers want to buy a new car 33 months and two days after they buy their current car. And it doesn't matter how long they have financed it. I think, you know, when the point brought up that we think has really been on the forefront during this period, I think we think and dependency on leasing has gone to somewhat return over the next many months as affordability becomes an issue again, and those used car prices normalized. But it's a fascinating time, I've never experienced so many things that you have to try to consider. And that's that you're placing some really positive things coming out of this and, and some really things I think that we have to consider moving forward. JJ Hornblass 23:57 Some feet I mean, you know, I referenced this kind of, you know, potential bubble for deteriorating credit. I mean, is that, you know, what's your, you know, is that one of those, those, those factors that are that are kind of looming for you out there? 24:17 Well, to be honest, Pete Carey 24:19 we've been in business since April, and we're still trying to find or figure out the Mazda way. One thing that has become very clear to us though is the customer that's attracted to the Mazda grande is a very high credit FIFO range. Mazda, however is, you know, been selling shorter, more than 80,000 cars historically, with the plant that's coming online and in Alabama, they're, they're aspiring to sell 400,000 cars in United States in a couple of years. So we're gonna have to, we'll be on that ride. We are very excited. To be their partner, we'll see how all that plays out. I do think in general terms, depending on the viability of the bat team, the appetite that the government has continued to safeguard people's income that we have, we have the potential to see delinquencies and losses spike. And it could be fairly significant, depending on a variety of things. I think everybody is preparing for that. So, you know, we have loan originations. in our, in our world, we also have delinquency and collection operations. And I think the ability to scale that to have strategies for early intervention and early escalation. And then, you know, I think we've been fairly benevolent with our customers as far as sending them and giving them room to take care of broader obligations. I think we're gonna be in that game for some time, as this starts to level out, and then we find out where we're going to be renamed, JJ Hornblass 26:10 maybe you can talk to your perspective on kind of credit, quality going forward. What's your what's your sense for, for where that's going ahead? You know, as we head into the new year? Renee Horne 26:28 Sure, so I'll split it in two parts. One is just acquisitions on new areas for donations. The other, of course, is managing the portfolio. They require separate treatments. I think, where we started with the pandemic, of course, like many of my counterparts, is being disciplined about our underwriting strategies in terms of what new credit we place on the books. So that's thing one, and we feel good about our current buy box and the outlook for that. As far as the existing portfolio of course, there were deferrals, first extensions, and in some cases, a small few with second extensions. I think in terms of the outlook more broadly speaking, JJ and counterparts here. There are a lot of obviously, dependencies. We're continuing to monitor the unemployment rate. We're continuing to monitor, monitor SARS, and overall consumer confidence. But one thing is for certain, I think the election will factor into just overall market response. And then of course, a vaccination, which ultimately, if you get to the root care of getting the economy overall back in stride, it's a lot of that is dependent on an actual vaccination. So I think, as responsible lenders do, we feel good about proper credit reserves, which we do in times of stress, and you run all types of scenarios, adverse scenarios and looking at what could or might happen, worst case, include it, and you plan for that. So certainly, we've planned and set aside a triple l if you will, for certain scenarios, I would hope that we don't get put to the test any of us quite frankly, because that will be bad for the industry. But I do believe the industry overall is resilient. There's a lot of great discipline and muscle fiber learned from the previous recession back in the mid 2000s. So it's a matter of vaccination, saying what happens with the next round of potential stimulus that would help but again, that can suppress delinquencies, so we've got to monitor make sure we don't necessarily have a bubble, and hunker down if needed. JJ Hornblass 39:53 Sean Are you have you changed your perspective on underwriting right now? Can Considering kind of the what what Renee is saying, meaning kind of what might be coming down the pike, early 2021 is now and the underwriting has to have a different perspective, you think. Shawn Allgood 40:15 So all of us probably collectively have put some form of our playbook in from 2008. And all of that includes, you know, if you will, you know, tightening down in certain pockets of of our underwriting. So, I feel confident, you know, our core strength at Santander obviously is in the nonprime space. And we feel very confident that, you know, the way we're underwriting the way we're originating today, regardless of what's coming down the road will be, you know, a well risk adjusted portfolio of business. You know, as it relates to extensions, we know we last reported 730,000 extensions, and that numbers, obviously higher today, and it's positive to see that coming out of that, you know, 60% of those made, which straight into making payments, now, some extended again, and some went to two back to delinquency, that's a pretty positive trend. And with a portfolio like ours, that is a very positive trend. So I feel like we've all made adjustments, we've definitely made adjustments in our underwriting, maybe around certain industries more than anything else, just to ensure that we're, we're not taking unnecessary risk. Can I just ask the group, you know, in terms of extensions, are, are they? Are they continuing today? And do you expect, you know, and, yeah, let's just sort of show of hands, who's got extensions out? I mean, Sean has already said, but you know, so we've got so Dwayne P. JJ Hornblass 41:46 And, Kevin, you don't have extension, so correct. Oh, Pete Carey 41:49 we're, Kevin Cullum 41:51 I'm not sure what you mean, by extensions, we have, you know, we had a huge spike. I mean, well above any place we've ever been before with regards to percentage of the portfolio. Since those first two months really, really started in March, so March, April, May ish, it's continued to come back down. And we're back down to pretty much a normal run right now. I mean, we're still doing deferments. We're still doing extensions, we're still, we're still helping customers who need to need the help. We have seen, I would I would agree with Shawn, we did we have seen? You know, we tried to do a lot of our planning based off of our experience from Oh, 708. And it's been kind of not happening that way. And yes, the stimulus has absolutely had an impact on that. I mean, customers are coming off extensions and making their payments at a much higher rate than we've seen even before the pandemic, and a lot of that probably has to do with stimulus. And so yeah, the expectation is with with no additional stimulus, those that are still being affected that that that default ration started climbing back up, we just haven't seen it yet. So you know, and again, I do think that customers that are having financial issues with it, with the value of the used car market, there, they've got a lot more flexibility, a lot more options. Even, you know, negative equity is always an issue when they're trying to trade the car. And but those customers are having financial problems, the value of the asset that they actually finance is giving them some options to sell it and get out of it and help them out with reducing their debt or whatnot. And we've seen some of that as well. So yeah, that's that's kind of where we are. But yeah, the extensions are up slightly at this point, but they're pretty much headed back to kind of a steady percentage. Yeah, I agree with Kevin, we, like many of you, the wine included had the rounds of extensions. And then I think, what a lot of consumers that in our case, our members, maybe took the extension as a safety net. But then once it expired, the overwhelming majority started paying again. So we feel good about that. Renee Horne 43:57 In our case, of course, we serve military families and or predominantly government employees in many cases. And so the unemployment there has been quite stable, not nearly as adversely impacted as other sectors. So those are all positives for us as well. Yeah, the percentage of extensions that we did for customers that were current or unprecedentedly hot. I mean, we've never seen that before. So a large portion that we were doing, were for customers who wanted the safety net, just one they didn't know and they needed some help. And those are easy to do for customers who've never had extensions or currently current. Yeah, let's do it. Let's help you out. Absolutely. come right out of that with a thank you and they just got right back into the groove. So Shawn Allgood 44:40 yeah, that's that's really big, a big portion of ours as well. Okay, Kevin, I would just say in sorry, JD, I was just saying I agree with that. We had that thing. That's what drove a lot of that payment rate coming out of that first cycle. And I think what we all have to be mindful of, is those that went into two different, you know, extension cycles are going to be your most problematic, and Renee likes Talk about kicking the can. And so I think we're all kind of waiting to see where the can falls. But I agree our extension rate is returned almost to a normal level. Obviously, we're still debate, there's still stress in the environment. But today, I would say we've almost returned to what, you know, the new normal, and we say normal these days with air quotes around it, of course. JJ Hornblass 45:21 I mean, it could be you could it could be a dinette, I mean, what what's the potential that it kind of loops back? I mean, you have you have certain states returning to quarantine. And that that means ACA, you know, renewed economic pressure there. Could it loop back and there might be a need for more extensions down the road? Or is it just don't really think about it that way, Shawn? Shawn Allgood 45:46 Well, I would say that we absolutely think about it that way. I think, you know, this idea of a second wave is alarming for everybody in the industry. If we end up with any type of, of lockdown. Again, if you will stay at home orders that close a lot of businesses, I think, I think it's all going to catch us we're all prepared for it. But it's going to certainly change a lot of the policies and practices we probably had in place for a long time. We got a bunch of questions from the audience. And I want to thank everyone for submitting them. Let me try to just raise some of them. We're kind of running short on time. But I'd like to try to get some JJ Hornblass 46:27 maybe we can deal with this in sort of a lightning round ish type of thing. So are you expecting an increase in consumer bankruptcy files as a result of the economy and COVID? And I might add, maybe to what extent? Dwayne, you want to? You want to take that? If Duane Freeman 46:54 I get a lot out there, the we don't i don't have a data to say exactly what the bank's forecast is around that. I could say that offer our portfolio, the way it's performing today. It's performing better than our expectations. Were from a performance perspective, both on the deferments and also with our core book. JJ Hornblass 47:15 Okay. What are the refinancing trends that you're seeing? Renee Horne 47:24 Renee, can you take that question? Sure, obviously, when rates are this low, it's a very attractive proposition. So certainly we do those. I don't know that I would say that I've seen anything that's off the charts, per se. But you know, the money's been cheap for a while. So you know, it's it's, it's, it's, you know, it's good for our members, we want to find the right balance between serving them, giving them the best rate and of course, maintaining a viable book. So yeah. JJ Hornblass 47:56 Are there increasing investments in remote e signature capabilities as a result of COVID? And maybe, maybe we can just kind of talk about just the digital investments as well. Maybe Pete, is that something that you can talk to? Over at Edmunds monster? Pete Carey 48:21 Yeah, coming off the legacy of having a contracting on the other side. And let's decide that was one of our big areas of focus as we rolled the company out in April. And we've had a tremendous amount of success from getting the Mazda dealers to get on that platform. So we've got about 70% of our business to generate electronically. I think one of the big drivers for that, besides the ease of doing business and the customer experience that is derived from that is the compliance concerns that the dealers have. But I will tell you, I think I'm probably a little bit unique, in the sense that when we launched this company, we launched on April 1, which was ubiquitous climbing at a minimum. And to add, there must JJ Hornblass 49:14 be some record in that, I don't know some sort of, it's got to go down in some history book. Pete Carey 49:20 Yeah, I'm gonna go down in history, all right. But as a result of that, change in in technology change in business processes. I think we all know dealers, they don't like change. They don't like new systems. They don't like new processes. So our field traveler, we took about 45 days off at the beginning of this pandemic, but we've been traveling since then. And it was really out of necessity. As you might imagine, the first concern was funding. So dealers aren't consummating the contracts correctly, funding became a very quick issue that we had to resolve and so contracting, really is the fastest way that we fund. And the dealers picked up on that fairly quickly. So maybe it was out of self preservation that I had adoption to the degree that I did. But now that we've got the caveat of having them do it that way, it's very, very appreciated on their part, for those purposes. Right. So compliant, don't have to worry about program parameters, or we're the compliance piece, but also the funding. JJ Hornblass 50:35 Kevin, maybe you can take this question, what kind of underwriting adjustments did you make early on during the pandemic? And have you gone back to pre COVID underwriting standards? Kevin Cullum 50:51 Well, did we make any adjustments during the payment? And, of course, we did. You know, we looked at, more importantly, the timing around validation of employment, and things of that nature, we tight had to tighten it up a little bit. But as far as overall underwriting, I'd say, No, we didn't make any major adjustments, we have been focusing on underwriting improvement for some time well before the pandemic, and we just kind of continue those same controls. And we don't expect to make any, any further adjustments are going forward actually, with with a, with a, I'm in a unique situation with with Nissan, and that we've got not a lot of new products that we're launching. So with a brand new model, brand new product, you know, you look at a different depreciation cycle on that new product, which actually makes it a much better product to finance, which gives us opportunity there. So, you know, we haven't had a lot of new business adjustments beyond where we already were just focusing on trying to validate employment status more than anything else. And so that's kind of where we've been. JJ Hornblass 52:08 So we, let's do one, one last lightning round answer for each of you. related to a forecast for next year. And and then one final question, perhaps we can hopefully we can get through quickly. So let's just talk about light vehicle sales forecast for 2021. IHS came out with a number 15 point 1 million. What do you agree disagree? What's your forecast for the SAR in 2021? Dwayne, you want to kick that off? Duane Freeman 52:48 Yeah, yeah, sure. JJ Hornblass 52:55 Shawn? Shawn Allgood 52:57 Yeah, I'd say 1515 and a half is a reasonable number. JJ Hornblass 53:01 Kevin, that's the same. Kevin Cullum 53:04 P one thing for sure, whatever we predict is going to be wrong. So break, but that's about the number. JJ Hornblass 53:10 That actually was not the answer we were looking for. But anyway. Pete Carey 53:15 You know, I think quite frankly, the possibility of a vaccine coming sometime towards the end of this year. You look at consumer confidence. Consumer confidence has been up for the last seven months. I think if people feel safe to freely move about and return to their work environment, I think those numbers are justified. JJ Hornblass 53:40 Renee, Renee Horne 53:41 ditto, I'd echo i'd echo that. Okay, JJ Hornblass 53:45 last question. Hopefully we can get through it quick, because we're over time. And this is from the audience in your, in your each of your experiences, what is the most critical business shift? dealers and or lenders should adapt and set them? What should they do to set themselves up for success during this time? What is the key? Sorry, forgive me, what is the key business shift that dealers or lenders should adopt to get through this critical time and we're going to go in reverse alphabetical order for this last one. So Renee, please, you can go first. Renee Horne 54:28 Yeah, I say reasonable and affordable payments and not scratching in our case, folks out and two loans that they might come back and regret later. JJ Hornblass 54:40 Dwayne. Duane Freeman 54:42 Yeah, I'd say digital, right. It's about allowing the client to be put them in control, providing transparency. We've invested heavily into digital, we just recently deployed our digital car shopping 2.0, which improves the user interface for clients to engage with us and then connect With our with JJ Hornblass 55:03 Kevin, Kevin Cullum 55:04 virtual workforce and online, soup to nuts financing, the customer is definitely moving that direction. And we've been, we've been contracting with the dealers for well over a decade. But completing the transaction completing the sale, including a finance contract online self service where the consumer is going to be key, not as we come out of the pandemic, and as it continues, and just the comfort that the customers are having with it is going to be key for the dealers. And our continued expectation for employees to continue to working in some kind of virtual ongoing is going to be the new norm for us. PII Pete Carey 55:44 I think more of the same, right? So dealers and finance companies, investing in the digitization of all things, make the consumer wants a faster transaction, they want to be empowered, and they want to feel like they've got a good deal. So those those things that removes friction. across those dimensions, I think you're gonna find winners and losers. JJ Hornblass 56:07 Shawn, you get the last word. Shawn Allgood 56:09 Yeah. So I would just say, you know, in 1999, I saw my first contracting prototype, and I said, this is gonna be all the rage, and everybody's gonna do it. 23 years later, I think I'm gonna be right. So it'll be all about digital next year, in my opinion. JJ Hornblass 56:23 All right. Thanks, Shawn. And thank you all. Thanks to all our panelists, who's really, really great being with you, and thank you so much for sharing your insights with us. This concludes our session. Want to thank again, our panelists and certainly FiOS for sponsoring this session, we're going to take a quick break. And I encourage you to meet with attendees and our sponsors. And then join us for our next session at 1230. Eastern for the third annual women in auto finance keynote and hear from Tanya Sanders, he VP head of retail credit underwriting and fulfillment at Wells Fargo auto. And that session is sponsored by defy solutions. Thank you all so much for joining us. Thank you. Thank you. Good day. </div> [/toggle]
