Stricter federal tax credit requirements for electric vehicles have prompted price cuts, incentives, and dealer operation changes.
Fewer EVs qualify for the $7,500 tax credit following new rules effective Jan. 1 that exclude vehicles using battery components produced by Chinese manufacturers. The move prompted automakers such as General Motors and Hyundai to offer $7,500 incentives for certain EVs.
Dealers also received more time to report EV sales that qualify for the tax credit to the Internal Revenue Service given that the rule now allows consumers to receive the tax credit discounts at the time of sale.
Meanwhile, Citizens Financial Group is set to kick off 2024 auto asset-backed securities issuance with a prime deal this month as several subprime financiers also prepare to come to market. Lower interest rates could boost issuance volume this year.
Lower interest rates and low unemployment also drive economists’ prediction of a soft landing in 2024.
In this episode of the “Weekly Wrap,” Auto Finance News Deputy Editor Amanda Harris and Senior Associate Editor Riley Wolfbauer discuss the top stories for the week ended Jan. 5, and what to expect in the coming week.
Early Bird registration is now available for the second annual Auto Finance Summit East, which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross-section of industry players. Early Bird pricing ends March 15. Visit AutoFinance.Live to learn more.
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 road map from auto Finance News.
Since 1996, the nations leading newsletter and automotive lending and leasing, it is Monday, January 8th, and I made a Harris joined by Riley Wolfbauer.
This is our weekly rap and what happened in auto finance for the weekend in January 5th, 2024 in Powersports news manufacturer Massimo Group filed a $25 million initial public offering in December to fund growth.
The launch of new product lines and the diversification of the group S supplier Base, Massimo, offers financing through third party lenders such as Northpoint, Commercial Finance and Automotive Finance Corp, as well as funds promotions for its finance partners to provide rates as low as 2.99% and online prequalification Massimo’s aiming to enter the top tier band in the powersports industry.
In line with companies such as Polaris and Yamaha, by launching New UTV and ATV models, opening new distribution centers, and hiring additional staff, the group will use the IPO funding as well as external funding sources and compliance, update.
The Federal Trade Commission has extended the comment period for its proposed rule targeting fees it deems unnecessary or excessive to February 7th.The rule, among other things, requires that businesses disclose the total price of an item or service, including all fees or charges a consumer must pay more than 50,000 comments were guarded on the role as January 2nd, though less than about 50 comments were related to search terms such as auto dealer and car.
In other news, after Tesla cut prices, a smaller portion of Model 3 model Y sales were released in the fourth quarter, a decline that suggests the EV maker may not be offering attractive leasing rates to consumers. According to Jeffries and Auto Finance news, fewer EV’s actually qualify for the 7500 tax credit following new rules effective January 1st that exclude vehicles using battery components produced by Chinese manufacturers. The move prompted automakers such as General Motors and Hyundai to offer $7500 incentives for certain EV’s.
General Motors is offering the incentive for the electric Blazer and Cadillac LYRIQ, which are no longer eligible for the tax credit.
Following the changes, GM Chevrolet Bolt EV and EUV remain eligible for the full tax credit. The company is also working to produce EV’s in line with the new requirements, and expects all remaining GM electric vehicles under the price caps for the credit to be eligible in the coming months. Months, dealers also received more time to report EV sales that qualify for the tax credit to the Internal Revenue Service.Given that the rule also now allows consumers to receive the tax credit discount at the time of sale, dealers now have until January 19th to submit reports regarding the sales that took place between January 1st and January 16th.
In other finance news, Citizens Financial Group is set to kick off 2024 auto asset backed securities issuance with a prime deal this month.
Santander Consumer USA Southern Auto Finance company and Global Lending Services are also expected to come to market with subprime deals.
Lower interest rates could boost issuance volume this year, with banks expected to increase or issuance amid rising deposit costs, lower interest rates and loan payment.
Also, Dr Economists prediction of a soft landing in 2024 and Riley has the details there of what they said.
So Riley. Riley Wolfbauer 3:31 Yeah. So to everybody’s, I guess positivity of the outlook on 2024 is much brighter for the economy than it was in 2023.Riley Wolfbauer 3:43
Going into 2023, most economists that we spoke with or any of you out there most likely spoke with, would have said that we were looking at a recession in 2023, but luckily we never quite got to that recession in combination of the Fed curbing inflation, getting it down to 3.1% as of the end of November in combo with unemployment rates remaining low. It’s it’s been a very good year for the economy to then go into a soft landing in 2024. Jonathan Smoke, Senior vice president and chief economic adviser at Cox Automotive, described it, calling it a Goldilocks environment, saying that when you have this full employment and above average wage growth and inflation is less than income growth, it gives us a good environment to as well as demand sustaining as well. It gives a good environment for a soft landing in 2024.
On top of that, it’s after the federal reserves last meeting on interest rates. They held them steady and indicated that they plan to or if all conditions remain the same, they intend to lower interest rates going into the second half of 2024.
So given that I that opens the door a little bit more for lenders to get a little bit more, I guess quote unquote aggressive in the market, not so much aggressive, but to open up the books a little bit, open up lending.
Riley Wolfbauer 5:21 And on the other hand, it also positive for consumer credit health as well.
So if consumers can have access to those loans, they can then improve their credit health and put themselves in a better financial position, which then leads to just a better healthy economy across the board.
Given all that, looking ahead to 2024 UM consumers didn’t fully get out of the woods and avoid like they still face pressures in 2023, we saw delinquencies rise. We saw net charge offs rise a little bit, but not at the same rate as delinquencies.
Uh, so consumer spending also continues to remain much stronger than anticipated.
So given all this, it seems that the economy is in in a good position to hit that soft landing, and we might be able to have a pretty positive 2024 across the board for lenders, consumers and the entire economy.
Amanda Harris 6:19 Yeah, definitely. And we know interest rates are going to be the main kind of driver of everything in our industry as well. I mean talked about it with the issuance levels potentially going up on you know, the capital markets. So that’s another piece of this. As affordability gets a little bit better, hopefully we might see, you know, sales do a little bit better than they have been.
Yeah. So definitely some positive notes there headed into the rest of this year, but we’ll we’ll just see what happens and you know, we’ll see how that plays out. So, but that about does it for today’s episode.
Thanks for joining us on the road map and be sure to follow us on X, formerly known as Twitter and LinkedIn, and we will see you online at autofinancenews.net and here next time.