Weekly Wrap: Auto lenders eye growth through innovation

Several auto lenders this week announced innovative ways to expand or improve their business . Chase Auto , for one, has joined with electric vehicle manufacturer Rivian , forming Rivian Financial Services . The program will offer digital-first consumer financing with applications submitted on rivian .com. Wells Fargo Auto , too, is investing in technology to increase automation within its loan - approval process . The lender hopes to up automation to more than 70% by 2022, said Ch ief Financial Officer Mike Santomassimo . Meanwhile, the Illinois State Legislature passed a 36% “all-in” consumer loan interest rate cap . In this episode of the Weekl y Wrap, Amanda Harris and Joey Pizzolato discuss these developments for the week ending Jan. 15, and what’s on the horizon. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; } Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com . Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain . Joey Pizzolato 00:02 Welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing. I'm Joey Pizzolato, editor of auto finance news and joining me today, as always is Amanda Harris associate editor. This is our weekly wrap on what happened in auto finance for the week ending January 15 2021. I want to thank auto finance News's advertisers state national voice Ops, strooke strook and lavan, marketscan and remitter for their continued support. Last week, the country prepared for tomorrow's inauguration of President Elect Joe Biden, which is not already without turmoil. Two people were arrested on separate occasions trying to enter the Capitol campus. One woman posed as a law enforcement official and another man trying to enter the inauguration checkpoint with a gun and 500 rounds of ammunition. On the labor front, initial jobs claim jobless claims continued to increase reaching your 1 million new claims as Coronavirus cases continue again to increase. Finally, Joe Biden began to announce policy that is shaping up to have lasting or immediate effects on the auto finance industry is 1.9 trillion stimulus plan. For one, we'll put an additional 14 $100 in the hands of consumers, which should be a good sign in the in the immediate initial 12 $100. Relief last spring was has largely been credited with propping up both credit performance and ushering in sales increases. However, Biden also named Rohit Chopra. I hope I said that right, who played a key role in the as as director of the Consumer Financial Protection Bureau, Chopra played a key role in the Bureau's creation alongside Senator Elizabeth Warren. And legal experts agree that the move most likely signals are returned to Cordray era enforcement policies and approach that the Trump administration administration has diverted from an auto finance earning season. My favorite time of year is also underway. Amanda, I believe you covered Wells Fargo, what was the takeaway from that? Amanda Harris 02:19 Sure. 02:19 Um, Amanda Harris 02:20 so the kind of the most interesting thing, I'll start there, then I'll kind of go into a little bit of a recap of their actual earnings, they did announce that they are trying to increase the automation of their loan approval process. So you know, lenders are kind of trying to invest more in technology, especially as more customers buy cars online and, and look for cars online. So wells is no exception. So they did want to they have a goal of increasing automation to about 70% of their process to be automated by 2022. And put that in perspective, they're about 59% in 2020, so that was pretty interesting that they did call out that particular investment that they're going to be doing with a certain goal. For their, you know, just typical earnings, they did see a decrease in originations for audit. So specifically, auto originations came in at about 5.3 billion is down about 22% from this time last year, not really not out of the realm of what's to be expected coming out of the pandemic, and everything, everybody's still kind of catching up. But it is down about 22%. And they did also see a slight, it's a very slight increase in their outstandings to 48. Point 2 billion, it's almost in line with where it was last year. So their standings are, are fairly straightforward, pretty in line with where they normally would be, it's just the originations are down, and that's most likely probably at least part due to the pandemic. Well, yeah, Joey Pizzolato 03:47 and we know that they they took a big step back in terms of tightening their credit box, stepping away from independent dealers. So I would imagine the automation move is is to help kind of supplement that, you know, if they can auto decision, I mean, auto decision has been around forever, but if the whole process can be automated, you know, that's less manpower, higher higher conversion rate, I would assume is the goal. So that might help, you know, help increase their, their volumes, even even as they kind of take, you know, a step back, or, you know, as as things start to improve, you know, maybe get a little bit more aggressive in the space. So, so it'll be interesting to see what the second quarter brings on the heels of, you know, everything that's been going on. 04:34 If absolutely, you know, Joey Pizzolato 04:37 we also got some news on electric vehicle manufacturer rivey ins interest into auto finance. I personally have been chasing this story. Since Amazon made its initial $700 million investment in the company. I believe it was way back in 2019, early 2019, maybe March if memory serves me, right. You know, it's always my number one question when when you see these new OEMs, especially these Eevee manufacturers enter the market is, you know, how are consumers going to finance these purchases, especially considering the ticket price on these cars is, you know, going up and up, less people are going to be able to buy them out of pocket. So finance becomes all that more important. So, you know, Now finally, we know that chase auto will be providing private label financing for the company. So you know, Amanda, what, what else do we know about the program, I know, there's not not a whole lot of information out there just just yet. It's fledgling, but, um, you know, we do have some details. Amanda Harris 05:37 Sure. So essentially, Chase, Otto will be partnering with rivian, and how it work is very digitally focused, again, we're seeing that's kind of the route a little auto lenders are taking. So this partnership basically allows them to have customers apply for, you know, financing, via rivieras website or via.com. So and then customers, when they do the application, they can kind of structure their financing, they can receive a decision, you know, in minutes, according to that to the details that we have so far, it does also support esign. So you know, those customers will also be signing those let you know, documents electronically, which is another big trend that we're seeing, especially with a pandemic. So they'll allow them to basically, you know, apply online, complete the paperwork online, and then they can go through that process, they can also according to what we have, so far, you know, make their payments possibly digitally as well. So it just gives them another avenue between, you know, rivian and chase auto to, obviously sell these cars online, another avenue for them to finance these vehicles. And obviously, with a big focus on electric vehicles, we've we've seen other, you know, kind of companies partner with rivian, to break into, you know, at least in part to break into the electric vehicle market. And even though things are kind of slowed down in that market a little bit, obviously, the whole pandemic really kind of shifted, everybody's focused, so let's just survive, and you know, do the normal, but there is a lot of talk that electric vehicles are still, you know, going to be coming, it's just a matter of when and how soon, but they are going to be coming to market and they will be the next kind of big thing from what I'm hearing. Joey Pizzolato 07:20 Absolutely. You know, I mean, I think it's, it's really evident in, if you look at, you know, the equities market, as well as you know, OEMs investment, General Motors, for one has been constantly doubling down on their on their electric vehicle investment trying to, you know, compete for two for that matter, trying to compete with the likes of Tesla. I mean, we've seen at least three electric vehicle manufacturers enter the equities market through, you know, either an IPO or a SPAC or reverse IPO, depending on what you want to call it. And those stocks, their valuations have have really gone up. I mean, just look at Tesla, it's absolutely insane. So there is, there is an appetite for it. You know, one thing that we always talk about is, you know, consumer adoption, right, electric vehicles are less than 2% of the whole market. So that is the number one Roadblock, getting consumers to sign on to these big ticket cars, as well as, um, you know, infrastructure, charging infrastructure that that goes beyond urban areas. That's another roadblock. You know, Ford for one has made huge investments in creating a nationwide infrastructure to help promote their Evie. Evie push. So it'll be interesting to see, you know, all as all these pieces kind of fall into place. You know, what, what happens to the auto finance market and how it's shaken up by the Evie. So we'll definitely keep an eye out for that. I'm sure you and I think Amanda Harris 08:50 one thing we also want to note with this too, just as far as, you know, how we could start seeing them as there was a change in administration in the very top or having a new president come in. And we know that this administration might be a little bit more amicable to anything related to, you know, climate and climate change and trying to limit you know, all the things that that all the experts talk about when it comes to climate change and ease was definitely one of the things it's always been talked about, as you know, maybe an alternative to a typical gas powered vehicle with you know, that in mind, so, you could just see this come up a little bit more, maybe push a little bit more given that focus, so we'll see. Yeah, no, that's Joey Pizzolato 09:33 absolutely true. I mean, if you look back, I don't last, I don't know couple years. I don't remember exactly when it was, but um, you know, tax tax credits on electric vehicle purchases. They really push forward on vehicle sales in consumer adoption, right, consumers can pocket some some extra money for buying an Eevee rather than a traditional combustion. Engine. So if the Biden administration, you know, takes that up again, you know, it is possible we see, you know, at least a little bump in in Evie sales. So yeah, again, we will be watching that. Finally, our top third top story I don't know if I had ranked them in any particular order. But one of our top stories from last week was that the outgoing Illinois state legislator also passed a bill that would limit all in interest rates on auto loans, including other loans, but auto loans for our readers purposes, to 36%, which will likely serve as a roadblock for smaller lenders and dealers ability to tack on ancillary products, according to the president of the Illinois Automobile Dealers Association. Big news, it was kind of a surprise, but not really unusual. You know, it's not not unusual at all for outgoing, you know, assemblies or legislators to pass last minute bills as their terms or the session is up. But the bill could signal increasing trends across the country to enact legislation more favorable, favorable to consumer protections, again, echoed by Biden's nomination for new head of the CFPB. So one thing that we will continue to keep a close close eye on as the year continues, especially in the first 100 days, as we see new policy rolled out from the administration. Um, so that's it for this last week. Amanda, what do we have for this week? Amanda Harris 11:40 So it is earnings season again, or favorite time? No, it is one of our favorite times because we learn a lot of our companies, so it's great. So we do have earnings coming up the big ones, you know, that we'll be covering, you know, this weekend and early next week will be Bank of America. It's coming up ally, financial, PNC financial services, we'll have those as well. truist as well, we'll have those. So it'll be earnings, earnings, earnings, and then, you know, some other exciting things are in the work too. So once we get through earnings season, we do have lots of other interesting kind of tidbits about the industry coming up. Joey Pizzolato 12:20 All right. Well, thanks, man. And thank you all for joining us. We want to hear from you, right, the roadmap on whatever platform you use to listen. Follow us on Twitter and LinkedIn. And we will see you here next week. I know last week, I said we were going to be back on our usual time, but I forgot about the holiday. But I don't think there's a holiday next week. So we should be good to return a Monday. But we will see you here next time and online at auto finance news dotnet thanks

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Chase Auto originations continue to shine through year-end

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