Podcast: Lenders eye affordability, subprime finance as credit performance weakens

Hello everyone, and welcome to the Roadmap from Auto Finance News. Since 1996, the nation’s leading newsletter on automotive lending and leasing. It is Tuesday, November 4th, and I’m Aidan Bush. First, I’d like to thank our sponsor for this week’s podcast, The Work Number by Equifax. This past week has been dominated by headwinds in the auto market, so I’m just going to launch right into it. The subprime auto asset-backed securitization market continues to see stress, Amy Martin from S&P Global told Auto Finance News. So we’re still seeing upticks in 60 day plus delinquencies and Amy Martin. Told us that those delinquencies have risen to over 6% in August, the highest they’ve seen in the subprime segment. S&P Global also placed ratings on several notes from lenders like Southern Auto Finance Company, Lendbuzz and First Help Financial. They’ve put them on credit watch negative around September. One potential cause is President Donald Trump’s aggressive immigration policy, as increased deportations may be affecting some subprime lenders who lend it to ITIN or undocumented consumers. Also in the subprime space, another subprime lender has announced their. Pausing auto originations. So this Irvine, CA based Bayside credit confirmed to us on Halloween, October 31st that the company had paused originations back in July. And you know this comes months after you know we’ve seen Automotive Credit Corp which had a similar situation where they paused originations back in August. Naturally, you’ve heard us talk about Tricolore hearings and there’s been some some lenders that focused on buy here, pay here and subprime like Prima Lend that have also filed Chapter 11 bankruptcy. So while Bayside Credit did not provide a timeline for when originations may resume, existing loans are still being serviced. By them and just to kind of give you a bit of context for the scale here, Bayside has originated more than $200 million in loans since founding in 2015 and at least according to them, serves thousands of customers in multiple states. Unfortunately, there may be headwinds beyond the subprime market to Ally Financial. Which has an auto portfolio totaling around 92.8 billion announced today that they were cutting 2% of their workforce. They did not, however, disclose which departments were impacted. Now to sort of round out some of our auto finance summit coverage, as I think we mentioned last week, we’re still handing out those. 25 stories We heard Chase Auto describe a cycle resistant approach to partnering with dealerships. Namely, the idea really was that partnerships are formed and structured with long term goals in mind and credit policies are tailored to specific clients, so through the individual dealerships. Ideally to weather any market headwinds. At a similar note at AFS, we also heard from subprime subprime lender Consumer Portfolio Services, which has started using a AI voice agent for early stage servicing and collections. President Mike Lavin of Consumer Portfolio Services said that their A I agent was currently performing on par with humans. So for some metrics they gave out, borrowers hung up on a I agents around 14% of the time, while humans were hung up on around 15% of the time. A I agents were also able to collect payments within one percentage point of humans. Some other news retailers across quarter three showed a decline in floor plan interest expenses, and some of those strategy shifts may be tariff related. According to Cynthia Kane over at Wells Fargo, as always, thank you for joining us on the road map and be sure to follow us on X and LinkedIn. And again, thank you to our sponsor, Equifax lenders who leverage income and employment verifications through Equifax as the works number.