Listen: Weekly Wrap discussion on auto ABS, used-vehicle values and CPS’ credit facility

Last week, used-vehicle values continued to shift amid improving inventory and slowing used-car sales. The Manheim Used-Vehicle Value Index declined 1.3% month over month to 219.9 in June, a 9.7% year-over-year increase. The sequential decrease comes on the heels of a 0.7% MoM increase in May. Meanwhile, CarMax Auto Finance , Hyundai Capital America, Santander Consumer USA and Vroom all announced plans to close $4 billion in prime and subprime asset-backed securities (ABS) deals on July 20. Also last week, Consumer Portfolio Services (CPS) looked to revamp its operational strategy and focus on growth by doubling its credit facility with Ares Agent Services — which was established in November 2015 — to $200 million. In this episode of the Weekly Wrap, Deputy Editor Amanda Harris and Editor Joey Pizzolato discuss the top stories for the week ended July 8, and what to expect in the week ahead. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 26-28 at the Wynn Las Vegas. To learn more about the 2022 event and register, visit www.AutoFinanceSummit.com . 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 00:02 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 July 11. And I'm Joey Pizzolato joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending July 8 2022. Janet general economic news the US six unemployment rate abroad measure that includes discouraged and underemployed workers and an all time low of 6.7%. Last month, dating back to 1994. The measurement indicates that layoffs and dismissals are low, but employers continue to struggle to hire qualified workers as the pool of workers searching for jobs Narrows and labor demand outpaces supply us job openings remained at 11 Point 3 million in May equaling about two job openings for every unemployed person in automotive, Volkswagen has selected BNP Paribas, Deutsche Bank and Morgan Stanley as additional underwriters for the manufacturers planned initial public offering of Porsche IPO is expected to value Porsche and about $91.5 billion, which will be the largest IPO in Europe. Meanwhile, California based electric vehicle startup rivian automotive built over 4400 vehicles in the second quarter up from 2500. Around in the first quarter, putting the company back on track to produce 25,000 units across three products throughout the end of the year. In auto finance, subprime lender consumer and portfolio services doubled its its credit facility with Ares agent services to 200 million. The credit facility was amended June 28, allowing the lender to borrow funds on a revolving basis through January 31 2024. Consumer Portfolio Services has certain artificial intelligence and machine learning to grow its original origination volume and the AI and machine learning systems serve across the CPSs credit dealer and payment models. Meanwhile, our max auto finance Hyundai capital America Santander Consumer USA and Vroom also came to market with 4 billion in prime and subprime ABS deals, all of which are expected to close July 20 Carmax plans to close a $1.2 billion deal. Hyundai's deal totals 1.4 billion and Santander is deal of 1.2 billion is its fourth subprime ABS transaction of the year. Vrooms captive United Auto credit is set to close at $225 million deal. Year to date, auto ABS volume has been dovetailing with 2021 year to day volume over the past few weeks. Also last week, US vehicle values again fluctuated, Amanda, what's going on in the US market. Yes,Amanda Harris 02:51 yeah. So last week, we got the new Manheim used vehicle value index. And it did dip down for the first time, after about three consecutive months of increasing again, we're not talking about you know, huge increases or, or dips. So in June it did 1.3% month over month to 219.9. So it's still 9.7% higher than this time last year. So you know, vehicle value still very elevated after they shot up like crazy after the pandemic, so still very elevated. But there's a couple of factors that are just leading to lots of fluctuation in the used car market. And as I mentioned in a minute, that will lead to quite a bit of change in the next few years, next three to five years down the road as well. But inventory, one of the factors inventory is getting a little bit better. So day supply into June at 48 days, that's compared with 39 days at this time last year. And that is above the industry norm of 40 days. That is mainly due to slowing vehicle sales, because prices are still very elevated. There's hardly any incentives out there. And there's also still just not a lot of not a lot of inventory even though it is improving. So people are kind of pulling back on the sales side. So that obviously is fluctuating prices a little bit. And that's why we see that that ticked down some still use retail sales did increase 5% month over month in June. But again, they're down 13% year over year and down 11% Compared to 2019 before the pandemic hits. So still not really coming back to pre pandemic levels. And, you know, with inflation happening, rising interest rates, consumers are really still pretty concerned right now. So that might mean that people pull back even further and then coming months, we're just not quite sure. You know, things have fluctuated so much every month, we're not sure if next month we'll see an uptick in or if we'll keep going down. So really Just to be seen, still, because it has been fluctuating so much with everything changing going on. Now looking forward, with inventory being tight right now on both the US market and the new market. So a couple of factors that we're kind of following is leasing. So way down, new vehicle production probably won't come back to normal levels, I put that in quotes, because we don't really know what normal will look like in a few years. But until at least 2025, rental sales, incremental feeds really pretty low right now. So those are all factors that would normally contribute to our, you know, US market in about three years, vehicles coming off lease vehicles being sold off fleets, new vehicles being sold right now and normally enter the US market in a couple years. So all that's kind of being dampened right now will end up affecting the new vehicle market in the US vehicle market in three years. So what will happen is, because we have fewer vehicles, so I'll be entering the US market in like 2025, when you want to fix that the wholesale market will be very much impacted. So we're going to see, you know, by 2027 2008, the supply train constraint seeing today will end up being to where the wholesale values will not. They will be impacted around that time. So, right now, the kind of thought is, you know, with everything going on, we're not going to have the conditions that really create a major decline in values beyond like normal depreciation, because there's not a lot of vehicles coming into the market around that time, that will end up impacting and bringing a lot of inventory to the market to bring down wholesale values. By then. So we're really going to be looking into this, it's actually going to be our feature coming up. So I'll have a lot more information on exactly what those factors will be exactly what the new vehicle market and the wholesale values will look like. Come 2027 2028. But right now, we know that things happening now are definitely going to define how things are going to look then those kinds of takeaways.Joey Pizzolato 07:23 Right couldn't have said it better myself. That about does it for today's episode. As a reminder, don't forget to register for the auto finance Summit, which returns to the Wynn Las Vegas October 26 through the 28th. We are also welcoming speaker nominations to come join our speaker faculty at the conference of your lender and you'd like to participate. Please reach out to us. We would love to have you. Thanks for joining us on the roadmap and follow us on Twitter and LinkedIn. We will see you online at auto finance news.net and here next time

Listen: Weekly Wrap discussion on auto ABS, used-vehicle values and CPS’ credit facility

Manheim Used-Vehicle Index dropped 1.3% MoM in June

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