NASHVILLE — Auto lenders have faced changing pricing dynamics amid rising interest rates, leading to mixed origination activity as some financiers stepped back and others took advantage of the shifting landscape, all while new finance models driven by electric vehicles continue to hit the market.
The Auto Finance Summit East kicks off on Wednesday, May 10, at JW Marriott Nashville in Tennessee, bringing together auto finance leaders to discuss key issues such as inflation, rising cost of funds, electric vehicle financing, digital strategy, subprime financing and the impact of changing risk appetites on sales teams.
Pricing dynamics amid high rates
The Federal Reserve on May 3 passed another quarter-point hike, bringing the benchmark rate to a target range of 5% to 5.25%, the highest level since 2007. While the Fed has indicated the latest hike may be its last in an effort to curb inflation, increased rates have already contributed to aggressive rate changes by some lenders, longer loan terms and compressed profit margins.
In response, banks have shifted toward more profitable lending products and slowed auto origination activity looking back to at least the second quarter of 2022. The pullback opened opportunities for credit unions to gain market share, while captives have held steady but did not see major origination growth in Q1.
Banks are expected to pick up steam in auto lending down the road, but the question of when will be pondered during Auto Finance Summit East and for the rest of the year.
Changing sales tactics
During the pandemic, dealerships turned to orders to drive new-vehicle sales as inventory was limited following production shutdowns. With inventory improving — new-vehicle supply was up 70% year over year at the start of April — sales teams are once again having to adapt.
Finance companies must also manage their sales and marketing personnel in a challenging environment defined by tightening credit. Sales leaders will gather during the summit to discuss how they are aligning strategies and engaging sales and marketing professionals to drive optimal performance.
Electric vehicles prompt subscriptions
Price remains one of the biggest barriers to electric vehicle adoption, spurring a wave of new finance models aimed at making EV ownership more affordable, including per-month subscriptions, loans that roll in tax credits and fleet rental.
The move poses opportunities for lenders to leverage finance and incentives to break through the upfront price barrier and capitalize on the shift outside of traditional lending models.
Follow all the latest news from this week’s Auto Finance Summit East here.
