Last week’s earnings reports in the auto finance industry were marked by new initiatives from Harley-Davidson and Truist Bank, and signs from Santander Consumer USA and Capital One Auto Finance that borrower health may be faltering.
Harley-Davidson is expected to launch a new certified pre-owned program as part of its growth strategy, and Truist Bank said it has accelerated its adoption of digitally-focused initiatives, including an AI-powered chat bot. While Harley-Davidson didn’t give an expected timeline on the CPO rollout, Truist hopes to have its customers fully integrated into its new digital platform by end of year.
Meanwhile, Capital One Auto Finance reported an uptick in net charge-offs as the bank pulled back on its loss reserves in auto; Santander Consumer USA’s customers increased the rate at which they requested payment assistance; and Ford Credit delivered another strong quarter for its OEM.
In this episode of the Weekly Wrap, Associate Editor Amanda Harris and Editor Joey Pizzolato discuss the top stories from last week, and what to expect in the coming days.
Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com.
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Hello, everyone, and welcome to the roadmap from auto finance news since 1999, the nation’s leading newsletter on automotive lending and leasing. I’m Joey Pizzolato, editor of auto finance news. And joining me today is Amanda Harris, Associate Editor of auto finance news. This is our weekly wrap on what happened your auto finance for the week ending February 5 2021. Man, welcome. Before we start, I would be remiss if I didn’t thank our advertisers, a Gora data exit, refinance and strict strict and lavonne for their continued support. So in general news last week, we had some good news in terms of the economy. Initial jobless claims declined to their lowest level since the end of November, coming up at about 700 and a little shy of 780,000. And continuing jobless claims came in at 4.5 9 million both are well below or not well below just just below not not let’s not get too crazy here. Uh, well below, I can economists forecast those those numbers are expected to continue to decline as the vaccine rollout continues, which means our readers, we’re probably seeing less and less updates on Thursdays in regards to initial jobless claims unless things God forbid, take a turn for the worst. You know, however, on the given the pace of the vaccine rollout, which has been hampered by a lack of supply and severe what winter weather in the northeast over the last week, Washington estimate, estimated this morning that general inoculation against COVID-19 won’t happen until the fall of 2021 which is a bit later than the summer forecasts and been previously discussed which is a little disappointing for you know, myself and Amanda. But still, you know, not not the worst news.Amanda Harris 01:59
Stay home like I’ve been doing that’s fine.
Joey Pizzolato 02:01
Exactly, exactly. I’m, I’m kind of, you know, growing and conforming to, you know, being homebody all the time. And finally, in general news last night, Tom Brady went to seven Super Bowl after plowing through Kansas City’s defense. I’ve never been much of a fan of Tom Brady myself, but there’s really no denying how great he is. To put a Super Bowl tie into perspective, Brady has more Super Bowl rings than any other football franchise. In History edging out Pittsburgh Steelers in the New England, New England Patriots with both only have six victories. segwaying into the auto finance a little outside news that came out this morning, Tesla CEO Elon Musk said in a filing with the Securities and Exchange Commission that is invest in $1.5 billion in Bitcoin and will start to accept Bitcoin as payment on a limited basis. In terms of our coverage, we’re a little over halfway through first quarter earnings, and we’re starting to see some common trends between the publicly traded auto finance companies. Our first story is on Harley Davidson. Amanda Well, what what do we learn?
Amanda Harris 03:19
Sure. So this week, we actually saw a few updates outside of just the normal kind of performance metrics that we’ve been following charge offs, delinquencies, things like that. So Harley Davidson, they, you know, they’ve been kind of working through a whole strategic revamp of the company, pretty much from top to bottom, we have new leadership in place they are they just got through the rewire which is kind of setting the stage for the hardwire, which is their five year strategic plan. So as part of that, their when their earnings came out last week, they did say that they are actually going to launch their own certified Pre Owned program, as the first is a pretty big deal. That means that you know, they will have you know, autonomy over those motorcycles. They will be the ones that certify them. Customers will be able to get those only through Harley Davidson, you know dealerships. So if they want i pre pre uncertified you know, Harley Davidson motorcycle, you need to go through the dealerships to get that with that new program. So that’s part of you know, the overall company’s kind of strategic plan to really focus on what they do well, and where they do a while. So he did see them kind of scale back on products scale back into certain markets refocus in the markets that, you know, they think that they will be able to target their, you know, typical hog motorcycle buyers in. So that’s just kind of a expansion on what we know, that they’ve been working toward and what we’ll continue to be working toward and into the next few years, and then just a little bit on their performance. So they have seen, you know, originations decline. Here we are, again in the fourth quarter to about 496 million. Their core, they also saw originations fall, and they are down for the end of the year, overall about 7% as well. So that’s kind of the reason for the reason behind all the changes, you know, I
Joey Pizzolato 05:16
was gonna ask you that the new certified Pre Owned program should help, you know, increase their finance footprint in terms of Harley Davidson financial services. No.
Amanda Harris 05:27
Yes, yes. So that is actually part of what they would like to do, is they want to really kind of, you know, they still have a pretty good penetration rate, as far as you know, how many of the Harley Davidson motorcycles are financed through Harley Davidson is still the majority. So they’re kind of capitalizing on that? Yeah, it is 67.8% in the fourth quarter. Yeah. And that’s pretty, pretty standard for them, they haven’t really seen that drop off. So this makes perfect sense for them. To see that and know that people still, you know, go to a Harley Davidson, you know, storefront or dealership to get a Harley Davidson motorcycle, and then finding it through Harley Davidson financial services. So this will be an extension on that, because I do have a fairly robust used, kind of programmed, but a lot of them are, you know, about seven years older years old or older. So this is really helped with the like, five year old and younger kind of motorcycles to kind of ramp that business up for them a little bit. And give that like, pre certified nod of approval that customers kind of look for when you look for us, especially motorcycle obviously, you want that to be
Joey Pizzolato 06:34
they didn’t I don’t I don’t remember them releasing an actual timeline on the CPL program. Right now, there
Amanda Harris 06:40
is no exact timeline. But we know that the strategic plan is a five year plan. So just it goes to common sense that I would imagine this would happen within the next year or so, as part of that plan, obviously, in the next five years, but I don’t think they would have been announcing it now. Had they been planning this, you know, five, six years from now. So I think it’ll be fairly soon that they’ll have more of a concrete date.
Joey Pizzolato 07:03
Yep. Yep. I agree. Um, you know, let’s, let’s hope for our sake, they start breaking out some of that CPO us versus new origination data in their earnings for us make our jobs easier?
Yeah, we will look for it for sure. Definitely.
Joey Pizzolato 07:21
segwaying into, I believe truist Bank also had some kind of non credit performance metric origination news. That was a little exciting, especially in light of kind of everything that’s been happening in digital transformation, acceleration, whatever you want to call it in the last year month. What have you. I know, Amanda, you’ve covered that one as well.
Amanda Harris 07:44
Yes. Yeah. So we know truth, you know, formed with the bb&t and SunTrust merger, back in December 2019. So as part of that, truist has kind of been, you know, moving clients over to all of their technology, you know, kind of forming they so they have this kind of digital platform that they want to bring everyone over to whether you’re bb&t customer centric customer, they want to eventually merge all the clients on to this new digital platform that they have is called premiere or something like that. And so that is one of the things are working toward. And part of the reason why is that, of course we know in banking, in general, more and more customers are doing their banking online. So truist is no exception, they just see like a 26% increase in their digital sales in the fourth quarter with about like 664,000 transactions in November. You know, pretty up from where it was last year until 19. So it just shows you know, more and more people, again, are going online to do all kinds of banking things. And so they that merger and trying to get everyone over to one platform that’s under the tumorous brand, and really like revamping some of their digital capabilities as part of that.
Joey Pizzolato 09:03
Great, Cool, well, we’ll definitely be keeping an eye on on that as well, as always. Now to dive in a little bit on credit trends that we saw from some of the top auto lenders this last week. Um, first is Santander consumer USA and I think the most interesting thing about that, you know, despite the fact that their net charge offs, and delinquency numbers were the lowest they’ve ever been coming in at you know, 4.4% of the lenders portfolio in 2020, which is 320 40 340 basis points down from 2019 year in total was that skew set is seen an uptick in the pace of forbearance request as a percentage of active accounts requesting a deferral accounts in deferral in the fourth quarter came at 5.7%, which is increase from 4.5% in the third quarter. But of course, still below, well below levels peak levels of 27%. You know, I mean, I think what’s kind of interesting about this is, you know, we have, we’ve always kind of been talking about how credit metrics or credit performance is gonna deteriorate, delinquencies and charge offs are gonna rise, we’ve kind of seen that, you know, here and there, Capital One had kind of an uptake of both deferrals and net excuse me, um, deferrals and that charge offs in the fourth quarter, even as a kind of, you know, took back some of those provisions for credit losses. Um, but we’re really not kind of seeing a large uptick. But I think these deferrals are really kind of indicative of the state of the consumer still, you know, we do still have relatively high unemployment, relatively high jobless claims, as we talked about, even if they’re improving. And I think, you know, there is a subset of consumers that still are really kind of struggling and, you know, really relying on that new stimulus that’s supposed to be coming down the pipe here. I don’t know, I don’t even know if there is a date. I think we’re just talking about at this point. But I think I think it’s really indicative that, you know, consumers still need some help. And, you know, the state of the industry, or the auto finance industry, excuse me, is is really going to depend on, you know, continued support from its, you know, its lending lenders, and the government and, you know, local and state kind of programs to kind of help keep the economy on its feet. Hopefully, it starts getting warm, though, which means that, you know, restaurants will open up, outdoor dining is back, consumers will be out, spending money, competence should go up. So we’ll be keeping an eye on that. Um, so for next week, what do we have, or I guess, this week? Because we’re not doing this on Fridays anymore. Today’s Monday. What do we have? What do we have going on this week, Amanda?
Amanda Harris 12:11
So this week says today, we’ll have the Manheim index released around this time every month. So we’ll get an update on these vehicle values. I have not yet looked at it. So I can’t give you a teaser yet on if they’re up or down. But we’ll have that up in a little bit. So you can check out our website to see where those values fall right now. And then, of course, we’ve got more earnings reports. We have GM financial coming up. It’s a big one for us. And then we might have some good best practices stories coming out for our AV products. So nice. Excellent.
Joey Pizzolato 12:43
Yeah, great. Um, well, you know, to be fair, by the time this this actually gets published, on this afternoon, your Manheim story might already be up there. So we’ll see. Great, you just
tuned into that website. We print Singleton. Yeah,
Joey Pizzolato 12:58
right. Exactly. All right. Well, that about wraps it up for today. to our viewers, we want to hear from you the run, rate, the roadmap on whatever platform you use to listen to it, whether it be Twitter, or whether it be iTunes, music, or Spotify. And follow us on Twitter and LinkedIn. Thank you for joining the roadmap. We’ll see you online at auto finance news.net and here next week.