Rising interest rates have prompted shifts in market share and affordability concerns across the auto finance industry, while several auto lenders issued auto asset-backed securitization deals during the past few weeks.
Following the Federal Reserve’s decision last week to leave the benchmark interest rate unchanged at a target range of 5.25% to 5.5%, auto lenders must prepare for an extended period of elevated interest rates and related affordability concerns.
Interest rates are playing a key factor in which types of financiers win and lose market share. Captive lenders held the largest market share of total auto financing in the second quarter, surpassing banks and credit unions on a year-over-year basis.
Several auto lenders came to market this month, with USAA issuing its first ABS deal since 2022.
Meanwhile, Carvana is shifting its focus to building positive EBITDA following steps to improve the retailer’s liquidity.
In this episode of the “Weekly Wrap,” Deputy Editor Amanda Harris discusses the top stories for the week ended Sept. 22 and what to expect in the week ahead.
Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas and features a fireside chat with Ford Credit. To learn more about the 2023 event and register, visit autofinance.live/afs/.
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter and automotive lending and leasing. It is Tuesday, September 26. And I’m Amanda here’s this is our weekly wrap on what happened in auto finance for the week ending September 22 2023. In automotive news, the UAW strike against the Detroit legacy companies Ford Motor Company General Motors and Stellantis continues into a second week. The carmakers have plunged billions of dollars into stock repurchases as they faced soaring labor costs over the next few years. And some investors have indicated they’re willing to forego those buybacks if the manufacturers pause buybacks to plan for long term following the UAW demands. The UA W also, last week planned additional walkouts at General Motors and Stellantis facilities while spearing Ford after making progress with those negotiations. And auto finance following the Federal Reserve’s decision last week to leave the benchmark interest rate unchanged at a target range of 5.25% to 5.5%. auto lenders must prepare for an extended period of elevated interest rates and the related affordability concerns. The restrictive phase is likely going to last longer than expected, prompting concerns that consumer confidence will continue to wane and demand for cars may decline. delinquencies too, are already above pre pandemic levels and if interest rates take much longer to decline, credit performance is likely to continue versus a worsening, and more consumers will hold off on large purchases. Interest rates have also played a key factor in which financers win and lose market share in the current environment. Captive lenders in the second quarter held the largest market share of total auto financing at 29.1%, surpassing banks and credit unions on a year over year basis. Captives likely have gained market share in the back of incentives, which were absent for much of the past few years. Banks continue to lead in q2 for new and used vehicle loan volume. While credit unions commanded the US market. It remains to be seen if UAW strike might impact the return of incentives and potentially Mark shifts in market share in the coming months and into the rest of the year. So we’ll be keeping a close eye on that. And capital market news USA issued the company’s first auto asset backed securities deal since 2022. A $790 million transaction backed by prime auto loans, Volkswagen to issued its first lease deal of the year at $1.5 billion transaction marked by lease receivables. per bond parvana. Two issued a $243 million deal backed by prime auto loans and marking the retailer’s second auto ABS transaction so far this month. Citizens also continued to securitize auto book after exiting indirect auto lending and August issuing a $1.5 billion prime auto ABS deal on September 6. activity on the auto ABS market is strong with Ford credit, GM Financial and Toyota Financial Services also issuing deals this month, we will Carvana is shifting its focus to building positive earnings following steps to improve the retailer’s liquidity position. The retailer’s debt piled up after Carvana burned through $2 billion of cash and the six months ending March 31 2022, prompting the company to eventually restructure its debt. And now focus on getting back to positive EBITDA. steps include cutting out non profitable sales, improving efficiency across the business and maintaining a steady approach to grow in order to manage unit economics before returning to growth mode. That about does it for today’s episode. As a reminder, you can purchase your all access pass to the auto finance Summit and the power source finance summit to attend both events October 29 through 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 auto finance news.net and here next time.