Podcast: ‘Weekly Wrap’ on BMO indirect exit, RV values

Amanda Harris 0:09
Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter automotive lending and leasing. It is Monday September 18, and I’m Amanda Harris joined by Riley Wolfbauer and Johnnie Martinez. This is our weekly wrap on what happened in auto finance for the week ending September 15 2023. An automotive news the UAW went on strike against the Detroit legacy companies Ford Motor Company, General Motors and scientists on Friday, following unsuccessful contract negotiations over the past few weeks. roughly 8% of the union’s auto workers are about 12,700 UAW members are on strike across a Salinas plant in Toledo, a General Motors plant in Wentzville, Missouri, and a Ford assembly plant in Wayne, Michigan, and extended strike could cause further supply shortages and what is already a tight inventory environment. Prices on these vehicles have been improving and incentives have been making a comeback for new vehicles. But along strike could reverse the progress that has been made since the worst of the COVID and D shortages, and lead to higher vehicle prices. average transaction prices inched up 2.8% sequentially and 1.6% year over year in August, the average MSRP also increase to $48,779 at 1% sequentially and 4.3% year over year. Meanwhile, tighter supply has led to elevated dealer profits which has created a new normal for supply levels going forward. According to study from Kerrigan advisors that surveyed OEM executives in the dealership by sell advisor database 61% of respondents indicated the new normal for day supply of new current inventory will land between 30 and 60 days while 21% per days will be the new standard. Obviously, we’ll have to see how the strikes affect that. Elevated dealer profits and increased valuations have also led to increased merger and acquisition activity among dealerships over the past two years, as were automotive Inc, the largest auto retail acquisition to 2021 and the third largest in in the industry’s history, in terms of purchase price with a $1.2 billion purchase of Jim coons automotive companies. Asbury acquired all these assets including real estate vehicles and the Mid Atlantic region companies 20 new vehicle dealerships 29 franchises and six collision centers and auto finance news. BMO Financial Group became the latest bank to exit indirect auto lending the bank based in Canada but with a large presence in the US including California, no longer accepted applications as a Friday go on our approvals granted before then, BMO will continue to provide auto loans directly to consumers, as well as commercial auto lending such as floorplan financing for dealers. The move comes falling below Moe’s acquisition of San Francisco based Bank of the West in February and multiple rounds of layoffs in the past year. BMO joins a list of banks that have exited indirect auto lending to focus on more profitable business lines. Citizens Bank and mechanics bank exited indirect auto lending earlier this year, capital 1/5 Third and PNC Financial also scaled back their indirect auto lending businesses this past year. Meanwhile, Leslie financial expanded its offering with the Gaya technologies to grow its full spectrum portfolio. Lesyk is working with the tech provider to offer improved decisions and applications for more than 14,000 dealer partners. The move allows us like to expand beyond this Kritis box to reach a larger segment of borrowers. When an application comes to Westlake through dealer management systems such as dealer checker route one, the application automatically runs through westlakes AI based decision technology and with SEC within seconds provides an approval conditional approval or rejection. Based on certain metrics some applications are also run through providers decision engine at the same time, allowing us to compare its own with beguines version of the deal before passing it to the dealership was it still resonates alone and presents as a westech deal to the dealer. They do receive a fee for originating loans selling it to Gaya. In compliance news and Illinois bill requiring repossession agencies to wipe consumer data from vehicles before they leave a repo lock will go into effect January 1 2024, after it was signed into law on July 28. The Illinois law amends the state’s collateral Recovery Act and requires licensed repossession agents to Clear Erase, delete or otherwise eliminate personal information collected or stored in or by the vehicle. The new bill is a sign that the Illinois General Assembly requires that key personal data is stored in vehicles. And this management of that data could lead to identity theft or loss of privacy. Last week Raley also covered auto credit access improving August Riley what’s going on there?Riley Wolfbauer 4:45
Yes, so according to the dealer track credit availability index. Consumer Access to auto credit increased 1.8% month over month, but declined 2.8% year over year to 99.1 In August on the index, so, yield spreads narrowed, subprime share increased, and that contributed to credit access overall indicated that was improving. However, average terms on loans increased consumer decline and down payments and approval rates declining moved against consumers access to credit. I spoke with Scott Kunis, Chief Operating Officer of Kunis Automotive Group. And he said that they’ve been seeing credit access loosen up a little bit within their dealerships. And he also noted that he he named a few lenders he named ally financial America credit Santander Consumer USA and US Bank as all institutions that have kind of reentered the market stronger than they were in the spring by loosening credit and also expanding indirect or indirect leasing programs. He said ally, for one has been trying to look to expand his program through lease offerings, while the other ones have kind of brought back like loosen up credit a little bit to expand portfolios. So that’s pretty much what’s been going on there. There’s that’s pretty much the gist.

Amanda Harris 6:14
Great, and well, we’ll keep an eye on I’m sure. Thanks fairly. And finally, in power sports, RV values decline in July, Johnny has the details.

Johnnie Martinez 6:24
Yeah, so this is a situation where you know, not only did RV values decline, but we’re also seeing shipments continue to decline registrations continue to decline. Even the dealer Sentiment Index saw a little bit of decline for the near term future. And it’s really just this market, you know, we’re coming off of the pandemic highs, and everything is trying to get back to normal. And with that happening, it’s causing a lot of things to trend downward. But both, you know, the, the RV, IA the the RV da, they’re starting to talk about how we’re sort of hitting that point of stability, to where now, you know, there’s a little bit of a better outlook for the long term and the RVD A’s dealer Sentiment Index. And so it’s there’s a little more positivity that we’re finally kind of hitting this this normalization point, this place where values shipments registrations, it’s finally back to a place where it’s sustainable, following everything of the past few years.

Amanda Harris 7:30
Great. Well, that about does it for today’s episode. As a reminder, you can purchase all your all access pass the auto finance Summit and the power switch finance summit to attend both events October 29 to 31st at the Bellagio in Las Vegas for 20% off, you can get your all access pass at WWW dot auto finance dot live. 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.net in here next time

Amanda Harris 0:09
Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter automotive lending and leasing. It is Monday September 18, and I’m Amanda Harris joined by Riley Wolfbauer and Johnnie Martinez. This is our weekly wrap on what happened in auto finance for the week ending September 15 2023. An automotive news the UAW went on strike against the Detroit legacy companies Ford Motor Company, General Motors and scientists on Friday, following unsuccessful contract negotiations over the past few weeks. roughly 8% of the union’s auto workers are about 12,700 UAW members are on strike across a Salinas plant in Toledo, a General Motors plant in Wentzville, Missouri, and a Ford assembly plant in Wayne, Michigan, and extended strike could cause further supply shortages and what is already a tight inventory environment. Prices on these vehicles have been improving and incentives have been making a comeback for new vehicles. But along strike could reverse the progress that has been made since the worst of the COVID and D shortages, and lead to higher vehicle prices. average transaction prices inched up 2.8% sequentially and 1.6% year over year in August, the average MSRP also increase to $48,779 at 1% sequentially and 4.3% year over year. Meanwhile, tighter supply has led to elevated dealer profits which has created a new normal for supply levels going forward. According to study from Kerrigan advisors that surveyed OEM executives in the dealership by sell advisor database 61% of respondents indicated the new normal for day supply of new current inventory will land between 30 and 60 days while 21% per days will be the new standard. Obviously, we’ll have to see how the strikes affect that. Elevated dealer profits and increased valuations have also led to increased merger and acquisition activity among dealerships over the past two years, as were automotive Inc, the largest auto retail acquisition to 2021 and the third largest in in the industry’s history, in terms of purchase price with a $1.2 billion purchase of Jim coons automotive companies. Asbury acquired all these assets including real estate vehicles and the Mid Atlantic region companies 20 new vehicle dealerships 29 franchises and six collision centers and auto finance news. BMO Financial Group became the latest bank to exit indirect auto lending the bank based in Canada but with a large presence in the US including California, no longer accepted applications as a Friday go on our approvals granted before then, BMO will continue to provide auto loans directly to consumers, as well as commercial auto lending such as floorplan financing for dealers. The move comes falling below Moe’s acquisition of San Francisco based Bank of the West in February and multiple rounds of layoffs in the past year. BMO joins a list of banks that have exited indirect auto lending to focus on more profitable business lines. Citizens Bank and mechanics bank exited indirect auto lending earlier this year, capital 1/5 Third and PNC Financial also scaled back their indirect auto lending businesses this past year. Meanwhile, Leslie financial expanded its offering with the Gaya technologies to grow its full spectrum portfolio. Lesyk is working with the tech provider to offer improved decisions and applications for more than 14,000 dealer partners. The move allows us like to expand beyond this Kritis box to reach a larger segment of borrowers. When an application comes to Westlake through dealer management systems such as dealer checker route one, the application automatically runs through westlakes AI based decision technology and with SEC within seconds provides an approval conditional approval or rejection. Based on certain metrics some applications are also run through providers decision engine at the same time, allowing us to compare its own with beguines version of the deal before passing it to the dealership was it still resonates alone and presents as a westech deal to the dealer. They do receive a fee for originating loans selling it to Gaya. In compliance news and Illinois bill requiring repossession agencies to wipe consumer data from vehicles before they leave a repo lock will go into effect January 1 2024, after it was signed into law on July 28. The Illinois law amends the state’s collateral Recovery Act and requires licensed repossession agents to Clear Erase, delete or otherwise eliminate personal information collected or stored in or by the vehicle. The new bill is a sign that the Illinois General Assembly requires that key personal data is stored in vehicles. And this management of that data could lead to identity theft or loss of privacy. Last week Raley also covered auto credit access improving August Riley what’s going on there?Riley Wolfbauer 4:45
Yes, so according to the dealer track credit availability index. Consumer Access to auto credit increased 1.8% month over month, but declined 2.8% year over year to 99.1 In August on the index, so, yield spreads narrowed, subprime share increased, and that contributed to credit access overall indicated that was improving. However, average terms on loans increased consumer decline and down payments and approval rates declining moved against consumers access to credit. I spoke with Scott Kunis, Chief Operating Officer of Kunis Automotive Group. And he said that they’ve been seeing credit access loosen up a little bit within their dealerships. And he also noted that he he named a few lenders he named ally financial America credit Santander Consumer USA and US Bank as all institutions that have kind of reentered the market stronger than they were in the spring by loosening credit and also expanding indirect or indirect leasing programs. He said ally, for one has been trying to look to expand his program through lease offerings, while the other ones have kind of brought back like loosen up credit a little bit to expand portfolios. So that’s pretty much what’s been going on there. There’s that’s pretty much the gist.

Amanda Harris 6:14
Great, and well, we’ll keep an eye on I’m sure. Thanks fairly. And finally, in power sports, RV values decline in July, Johnny has the details.

Johnnie Martinez 6:24
Yeah, so this is a situation where you know, not only did RV values decline, but we’re also seeing shipments continue to decline registrations continue to decline. Even the dealer Sentiment Index saw a little bit of decline for the near term future. And it’s really just this market, you know, we’re coming off of the pandemic highs, and everything is trying to get back to normal. And with that happening, it’s causing a lot of things to trend downward. But both, you know, the, the RV, IA the the RV da, they’re starting to talk about how we’re sort of hitting that point of stability, to where now, you know, there’s a little bit of a better outlook for the long term and the RVD A’s dealer Sentiment Index. And so it’s there’s a little more positivity that we’re finally kind of hitting this this normalization point, this place where values shipments registrations, it’s finally back to a place where it’s sustainable, following everything of the past few years.

Amanda Harris 7:30
Great. Well, that about does it for today’s episode. As a reminder, you can purchase all your all access pass the auto finance Summit and the power switch finance summit to attend both events October 29 to 31st at the Bellagio in Las Vegas for 20% off, you can get your all access pass at WWW dot auto finance dot live. 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.net in here next time