Listen: All eyes remain on Carvana

Last week, all eyes were on Carvana as the retailer hired a financial advisor and the company’s major creditors signed a truce to prevent fighting amid a potential restructuring. Ally Financial Chief Executive Jerry Brown said he sees minimal exposure risk to the retailer’s woes. Still, website traffic for the retailer has been declining for three months, and consumer complaints continue to increase . Meanwhile, used-vehicle values declined for the sixth consecutive month, and average amount financed on new autos reached a record high. In this episode of the Weekly Wrap, Deputy Editor Amanda Harris, Editor Joey Pizzolato and Associate Editor Riley Wolfbauer discuss this week’s top stories, and what is to come in the week ahead. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Joey Pizzolato 0:09 Hello everyone, and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing. It's Monday, December 12, and I'm Joey Pizzolato joined by Amanda Harris and Riley Wolfbauer. This is our weekly wrap on what happened in auto finance for the week ending December 6 2022. In general news, the Federal Communications Commission made clear that ringless voicemail messages are considered a call and are subject to the Telephone Consumer Protection Act, potentially opening the door for future litigation and prompting lenders to review their consent processes. The FCC has recent ruling denying a petition by a distributor of direct voicemail messages technology that argued that the messages which are delivered without calling the consumers telephone number, but instead via direct communication between the technology provider and the phone carrier, we're not subject to TCPA re regulations. In auto finance, the average amount financed on new vehicle purchases climbed to a record high in the third quarter as loan terms lengthen and monthly payments continue to grow. consumers buying a new car financed on average $41,665 in q3, an increase of 3.4% sequentially and 10.4% year over year, according to Experian. average loan payments reached $700 compared with 618 A year ago, while the average loan term grew by less than one month to an average of 69.7 months. average interest rate was 5.16% on new car loans in q3, up 177 basis points year over year. Meanwhile, US vehicle values can decline 14.2% year over year in November, marking the third consecutive month of year over year decreases as values continue to normalize while US retail sales slow and consumer confidence dips. Manheim used vehicle value index fell 0.3% month over month to 190 9.4 in November, marking the first time since August 2021 that the index came in below 200 November March the sixth straight sequential decline in the sequential decline excuse me in the index, which is down 15.6% compared to a peak of 236.3 in January. Last week. The auto finance news team also continued its coverage of Carvana as the retailer hired a financial advisor and the company's major creditors signed a truce to prevent finding a minute potential restructuring. Riley you looked into Carvana is website traffic. What trends are we seeing there?Riley Wolfbauer 2:51 Yes, so Carvana had for the month of November, they had 15 point 6 million visits to their website. And that's not unique visitors it's like that also includes multiple visits. So anytime anybody visited the site in the month of November. So as I said they were at 15 points civic 15 point 6 million site visits in November, which is a 16.9% decrease compared with October. And that followed a 4.5% sequential decline from September to October as well. So over the past couple of months Carvana has been seeing a decline in website visits, but they are not alone in that decrease Carvana is competitors Cars.com CarGurus and Vroom also experienced declines in November. Room recorded the largest month over month decrease in visitors that 21.4% But they totaled 1.5 1 million visitors, as I said cars.com and cars do and CarGurus also saw sequential declines at 8.4% and 3.5% respectively. So it's really across the industry that we're seeing a decline in consumer demand and decline in consumer visits to these retailer websites. The only shift technologies however, they were against this trend and they actually saw a 9.7 9.6% increase in visitors in November from October. This all comes as consumer confidence is beginning to decline. According to the consumer confidence index, consumer confidence declined 2.2% month over month in November due to consumers bearish outlook on the labor market and income. So it shouldn't come as a surprise that as demand is declining that we're seeing a decrease in consumers looking up opportunities to purchase a car.Joey Pizzolato 4:57 Right right. Carvana also seen a spike in consumer complaints on that note have with the Consumer Financial Protection Bureau. Tell us about that, Amanda?Amanda Harris 5:08 Sure. Um, you know, so objectively, Carvana has not received, you know, a ton of complaints they've received about 361 dating back to 2011. So they haven't received no 1000s of consumer complaints or anything like that. But I think what's important to note is almost half. So about 47, I think is like 40, something percent of those complaints have been received within the past year. So really, it's been in the last year or so that the number of complaints filed with the CFPB against Carvana have really just skyrocketed. So for the for most of those that come in within the past year, I definitely think it's important to note and kind of look at what might be driving some of those complaints. Obviously, they've had quite a bit of registration and titling problems, they actually have landed into a class action lawsuit related to those issues. So that is, obviously one of the things that are driving some of these complaints. There were specific complaints that mentioned exactly that, that they had issues, getting the title at the end of the purchase, things like that definitely stood out. Other issues within the complaints, or you know, billing or credit approval issues, of course, fraudulent activity, as always reported, and then just some misleading and advertising or marketing, at least in the view of the consumer providing the complaint. So definitely seen an uptick. Recently, even within the past three months, there's been quite a few complaints related to vehicle loans and leases, specifically, again, the registration, and titling came up quite a bit about there about 44 complaints filed just in the past three months. So if you think about 360, total from 1011, and then 44, those are from the past three months. So there's definitely clearly been more consumers complaining against marijuana and more of like an uptick in people honing in on some of these issues. And we know that the CFPB is looking at this as well, no, there's been multiple, you know, lawsuits and things like that, looking at some of these problems like Ron has been having. So we'll have to kind of see how these kinds of complaints are may be translated into potential action from the CFPB. Sometimes complaints do warrant an investigation from regulators, we've seen that happen in the past. So it really just kind of depends on what they choose to do with this. We know, they are looking into that registration issue. So whether you're looking into some of the other things that are prompting complaints, it's just another kind of thing to look at right now with Carvana. You know, they've they've been having quite a few problems of profitability. They're talking about debt restructuring, they're kind of struggling on, you know, the vehicle side inventory side, you know, they were acquired ADESA. And then they had a bunch of debt problems after that. So it's just kind of another thing that is something to look to look into with Carvana and kind of monitor closely to see if maybe the complaints continue going up, and maybe if they spur any further, you know, action from consumers from lawsuits or from regulatory agencies against the retailer, so just kind of have to see.Joey Pizzolato 8:16 Right, right. And perhaps the biggest question mark last week was in regards to ally financials residual exposure to Carvana. As a reminder, Ally financial provides 5 billion in four forward flow capacity and 2.2 billion floorplan line to Carvana. Ally financial remains optimistic on its partnership with Carvana chief executive JEFFREY BROWN downplayed the auto lenders risk exposure to a Carvana ongoing financial woes that you mentioned Amanda at Goldman Sachs 2022 US financial services conference last week, noting that the lender is in quote daily and weekly talks with Carvana chief executive Ernie Garcia and his team. Brown noted that allies exposure is limited to the loans and buys from the retailer which are performing well. It's for plan line is also secured by the vehicles themselves limiting the lenders risk exposure. Ally does not lend against any of Carvana has real estate which collectively be one of the first assets to go in a restructuring. Analyst at BNP Paribas said that they didn't see any reason ally would back away from the partnership given the performance and the profitability of those loans that Carvana sends it. Still Carvana is having trouble entering the asset backed securities market. It hasn't executed a nonprime transaction since March and year to date. ABS volume is down 55% from its year and volume in 2021. That about does it for today's episode. Thanks for joining us on the roadmap. And be sure to follow us on Twitter and LinkedIn and we will see you online and auto finance news.net and here next time.

Listen: All eyes remain on Carvana

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