Delinquencies and net losses in the prime and subprime auto asset-backed securities market continued to increase in September, while captive market share of total auto financing reached its highest level in the third quarter since Q1 2018.
Late-stage delinquencies across prime and subprime auto asset-backed securities ticked up year over year in September, according to S&P Global. Subprime consumers continue to feel the effects of inflation, leading to worsening performance.
Meanwhile, captive total market share, which includes new and used loans and leases, increased to 30.4% in Q3, according to Experian. Captives surpassed credit unions and banks on a YoY basis to regain the top spot.
In this episode of the “Weekly Wrap,” Deputy Editor Amanda Harris and Senior Associate Editor Riley Wolfbauer discuss the top stories for the week ended Dec. 1, and what to expect in the week ahead.
Subscribe to “The Roadmap Podcast” on iTunes or Spotify, or download the episode.
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Riley Wolfbauer 0:08 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 Monday, December 4, and I’m Riley wolf power joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending December 1 2024. This episode is sponsored by business law firm McGlinchey. An economic news inflation adjusted personal spending, excluding volatile food and energy components. Rose 0.2%. In October, after September it was downwardly revised to 0.3% events. Economic activity has slowed in recent weeks as households are pulling back on discretionary spending. Meanwhile, claims for unemployment insurance rose to 1.93% or sorry 1.9 3 million in the week ending November 18. In compliance news, the Federal Trade Commission and the Consumer Financial Protection Bureau are cracking down on junk fees. auto lenders must review their contract and disclosure processes as the CFPB is expanding its investigation of fees charged during the auto purchase and financing processes. The FTC and CFPB proposals and 2022 prohibiting fees regulators deem excessive or unclear and I’ve kept a close eye on fee practices since the fees can include convenience fees, overdraft and late fees along with unexpected fees for products or services. auto lenders must ensure that contracts properly disclosed fees and that fees are being assessed in line with the language included in the contract signed by the consumer and powersports sports. motorhome values rose in October after fluctuating month by month since June. They went up in June then declined in July, went up again in August then fell in September and then rose again in October. average values increased 3.6% month over month and 2.8% year over year to just above $63,000. According to black book. On the table side average values at auction landed just below $19,000 In October, down 6.2% year over year. In September, RV sales were down 21% year to date compared with the same reporting period in 2022. Consumer demand for recreational vehicles and power sports units has declined due to the current macro economic environment. In Finance News captives continue to regain total off auto financing market share in the third quarter. Captive total market share which includes new and used loans and leases increased 8.8 percentage points year over year to 30.4% in the third quarter, marking the highest level for captives since the first quarter of 2018. According to Experian, captives surpassed credit unions and banks on a year over year basis to hold the top spot. Captives have regained market share. by reintroducing incentives as inventory has recovered. During COVID-19 supply chain challenges, captors withdrew incentive offers. And as interest rates were increased by the Federal Reserve credit unions were able to gain market share by offering lower rates compared with the rest of the competition. On the US vehicle side credit unions still control the greatest market share at 30.3%. Last week, Amanda had some coverage on credit performance and the auto asset backed securities market. What are the details there? Amanda Harris 3:36 Yeah, so you know, we have seen kind of an influx, the last couple years of new and small subprime lenders coming to market. So with that they’re bringing their books, and a lot of these lenders lend to deeper subprime consumers, consumers with, you know, lower FICO scores. So obviously, their delinquencies just by default are going to be a little bit higher. So that influx of these smaller issuers or issuers that are coming to market for the first time, issuers come to market on a non regular basis, kind of meaning, you know, at least one of those parameters are bringing in their performance and basically leading to an uptick in late stage delinquencies across the market. So this is the measurement that Fitch Ratings has done. And, you know, so prior to winces across across the market, given a few exceptions, you know, for like online retailers and things like that, that don’t really work the same way, but for for the most part, looking at all, you know, publicly publicly out there rated deals in auto abs, so they’re 60 Plus day delinquency Index rose is 6% in October, and that’s coming off of a high of 6.7% in September. So by comparison that was at five point 13% During the same reporting period of October last year, so it’s definitely going up and part of it is the inflationary pressures that we know so far. I’m assuming you’re facing. So delinquencies are up because of the inflationary prices and in delinquencies being up regardless. But the other piece of this that they are kind of trying to account for at Fitch is this kind of influx of these new issuers bringing in those delinquency levels and kind of pushing the entire index up. So it’s just something else to kind of think about when we’re looking at performance as a whole, like looking at it holistically, rather than just saying, okay, delinquencies are up because performance is weaker, that is a piece of it. But it’s also just how the capital markets are working right now, is how the issuance is kind of trending. And it’s just what’s happening as far as you know, these new issuers coming to market. So we’ve seen you know, a couple different ones that have come to market since 2019. For the first time, there’s a repo acceptance, they did their first inaugural auto securitization in 2019. The move seen global finance, for example, we’ve seen avid finance, avid acceptance, scuze, me, and then we’ve also seen, you know, some subprime issuers who have come to market and then went defunct. So he’s an American car center and US auto sales, both close their doors. And then of course, all of those abs deals are starting to face, you know, pretty high loss numbers. So that obviously, will kind of move things around a little bit in the index, if you’re looking holistically as well. So just something to keep an eye on. We do expect auto ABS delinquencies to pick up modestly in 2024. Again, as the pressures kind of continue with inflation, but you know, low employment, unemployment is still pretty low. So there’s not any, like major considerations or concerns that delinquencies will skyrocket or anything like that. We have seen, you know, a nice little uptick in delinquencies that we’ve been seeing, especially in subprime, but losses still are at it, I think, a huge concern for the industry. They’re they’re kind of holding off in charge offs, and all that are still kind of holding off. But delinquencies are definitely rising. And people are going into that late stage bucket as well, so that they will be monitoring too closely. Great. Riley Wolfbauer 6:58 Thanks, Amanda. So that about does it for today’s episode. Thanks for joining us on the roadmap, and be sure to follow us on X formerly known as Twitter, and LinkedIn. We will see you online at Auto Finance News dotnet and here next time