Podcast: ‘Weekly Wrap’ on rising debt, tech, compliance 

Amanda Harris 0:23
Hello everyone and welcome to the roadmap from auto Finance News in 1996, the nations leading newsletter and automotive lending and leasing. .
It is Monday, July 1st and I’m Amanda Harris, joined by Ashley Savage and James Van Bramer. . This is our weekly wrap on what happened in auto finance for the week ending June 28th, 2024 and Economic News. . The core personal consumption expenditures price index, which strips out volatile food and energy items, increase point 1% sequentially in May, marking the smallest advance in six months and bolstering the case where lower interest rates this year and Automotive News Volkswagen AG invested $5 billion in EV startup Rivian automotive, with the two companies set to jointly develop battery powered vehicles and software and auto finance higher cost for everyday expenses such as gas, groceries and vehicle insurance, have prompted many consumers to turn to credit cards with rising expenses, making it harder for consumers buried in debt to qualify. .
For auto loans, though, motor vehicle Insurance Index, which is part of the US Bureau of Labor Statistics Consumer Price index report rose 20.3% year over year in May, according to data published June 25th. . Bank card balances also grew 13% year over year. . At year end 2023, reaching a record and surpassing $1 trillion for the first time, that data is from TransUnion. . They could either rising across the auto finance sector and lenders are keeping an eye on payment to income and debt to income requirements as insurance costs add to the challenges at an already credit challenge segment faces deductibles are two to three times higher for many consumers, and insurance companies are having to raise monthly premiums to combat higher costs for vehicle repairs and coverage are full subprime feature diets into this issue. .
And how lenders are adjusting. . So be sure to check it out. . Sentiment is also mixed regarding how the upcoming presidential election will impact auto, finance, industry and a Cox on mode of election research. . Study published June 25th, 66% of consumers and 82% of dealers said the outcome of the election will affect interest rates. . Dealers generally had a more pessimistic view on the elections overall impact on the auto industry compared with consumers across top of mind issues such as inflation, interest rates, vehicle purchase decision and EV sales and powersports news motorhome values fell 20% year over year to discover $58,400, while towable values declined year over year by 9.2% to about $19,389.00 values were relatively unchanged from April to May and auction volume also decreased sequentially by 7.9% for motorhomes and by about 15% for towables Yamaha Motor Finance Corp USA also named John Thacker as its new chief executive as a June. 24th last week also our updates on compliance and James has those takeaways that, James?
James Van Bramer 3:14
Thanks, Amanda. . As we’ve been reporting off for some time to see if PHP has had several reports on its auto finance data plan coming down the pipe and we’ve now found out there first report which was on a negative equity. . This first report was based on data sets from 2018 to 2022. . The data pretty much mirrored what we’ve seen in terms of negative equity from what we’ve reported about, but just for some insights they found about 12% of loans were financed with negative equity and on these loans financed with negative equity, they were about twice as likely to go into repossession and loans that did not have negative egg negative equity finance onto their new loans. . The Bureau did decline to say how they might use the report from a compliance perspective, but legal experts have also raised questions about how the Bureau might actually attempt to do that. . One issue experts raised was that the data includes the pandemic, which, as we all know, had a pretty significant impact on the automotive industry. . A pretty unique impact that might add, uh. . This is exemplified by, for example, in the data that the CFPB provides, the drastic increase in loans finance would negative equity in 2020, for example, which was actually higher than the average that I mentioned of 12%. . This file, as low as to below 10% in 2022. . So as you see from the report that they from the data they report themselves that prior to during the pandemic compared to the app after the pandemic, negative equity is just one example of how the automotive industry changed quite dramatically. .
But in response to that criticism, to see if PHP said that they simply use the data that they had to create their datasets, which does not include 2023 or obviously the ongoing 2024 year, they declined to say which topics they will cover in their next reports. . They also did not provide any specifics on when these following reports may come out, but for now it seems that about 2018 to 2022, as they previously said, is the data that they have. . And we’re gonna kind of just have to be. . And that’s just kind of has to be in mind as we see the dual reports come out. . We also had several updates in tech in the text based last week, and I know actually you had the details with that. . Ashley Savage 5:34
Yeah. . Thank you, James. . Like you just said, I spent most of last week in San Diego for origins, lending tech live and the sessions were great. . The weather was great, so I really can’t complain much. . Kind of sitting in an absorbing everything that I experience at the at the summit last week, but I have to say it was really nice to get a closer look into, you know, what dealers are looking to find and credit unions. .
And then on the other hand, what credit unions are looking to find in a dealer?
There’s definitely some nuances there on the dealer side, dealers are consolidating the number of lenders they work with and their prioritizing lenders that are investing in tech and underwriting and lending efficiency as a whole as they highlighted on several of the panels, credit unions tend to be a bit slower in doing so, which poses a problem for some that are a bit hesitant in leaning into those tech investments. .
Ah, the reason that dealers are prioritizing these lenders that you know, are investing in tech is because by trimming the number of lender partners, different auto groups can do more monthly deals with their lender pool. . So it’s, you know, it’s less lenders, but it’s more volume and quality partnerships with the people that they’re working with, which is what they’re looking for, UH-1 dealer group, for example, has dwindled, dwindled its lending, pulled down from more than 800 lenders to 200. .
Ish unique lenders. . Another group is working to get its lending pool closer to 50 lenders, where as right now it’s idling. . You know a little bit above 200. . So it seems to be across the board. . This is something that dealers are looking to find. . That’s gonna be interesting, I think to see which, you know, credit unions keep that in mind where they put their investments and what that looks like for them on the credit union side, you know, they’re looking the same thing. . They’re they’re keeping an eye on their dealers, but for different reasons. . You know, delinquencies are high, fraud is always a concern and you know they’re they’re leaning into these new metrics of how they’re monitoring dealers and you know, X amount of delinquencies. . You know, they start to to to look at what the risk might be in keeping that dealer and their pool and vice versa. . So I think it’s an interesting dynamic that they’ve got going on on both ends. . It looks like they’re looking for quality at. . They’re looking for consensus consistency. . Excuse me and they’re looking for speed. . So the ways that they’re looking for that and the way that they’re going to find it, I think will be an interesting play out over the next few months as we saw two credit unions market share is kind of dipped back compared to banks early in the first half of this year. . We talked with Melinda Zabritski and she explained that that’s not necessarily that banks are out competing, but that credit unions are kind of pulling back. . And another interesting thing I heard at Origence was that they shouldn’t be doing this from a credit union. . They kind of shared that, you know the the quick, the quick reaction is to pull back when things get, you know, a little bit riskier. . The delinquencies are high and a lot of people are saying, you know, instead of doing that instead of pulling back, invest in tech. . Understand your consumer and find ways to be there and provide that value at a time where there are market headwinds. . So All in all, those were some of my key takeaways from, you know, just the things that are top of mind still. . So I think that will be an interesting thing to watch play out, see how dealers now negate which credit unions make sense for them to how credit unions navigate, which dealers make sense for them. . And they detect that that goes in hand in hand with both of those. . So that’s what I’ve got from origins. . I’m there. .
There’s already some coverage on the side available next few days there will be a bit more that kind of breakdown. . The nuances with credit unions, as well as just kind of like a tech overview, so look forward to that as well. . Amanda Harris 8:45 Very violent forward to that as well. . Ashley about does it for today’s episode as a reminder of registration is open for the 2024 Auto Finance Summit and power Source Finance summit, both for turning to Vegas and October. . More information can be found at auto finance dot live. . Thanks for joining us in the road map.