Listen: Weekly Wrap takes on tech moves in auto finance

Auto lenders last week continued their investment in technology advancements as the industry leans into widespread digitization amid uncertain economic conditions. Flagship Credit Acceptance , for one, made an equity investment in automotive e-commerce provider Blinker to expand into direct-to-consumer lending, and U.S. Bank launched real-time payments (RTP) for its dealer partners following its April pilot of RTP to consumers selling their cars to Driveway , Lithia Motors ’ digital retailing arm. Meanwhile, Affinity Federal Credit Union inked a fresh partnership with Credit Union Leasing of America to offer leases to its members , and TD Auto Finance partnered with Lease End to buyout consumer leases . In this episode of the Weekly Wrap, Deputy Editor Amanda Harris, Editor Joey Pizzolato and Associate Editor Riley Wolfbauer discuss the top stories for the week ending Aug. 12, and what to expect in the week ahead. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 26-28 at the Wynn Las Vegas. To learn more about the 2022 event and register, visit www.AutoFinanceSummit.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 Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing, it's Monday, August 15. And I'm Joey Pizzolato joined by Amanda Harris and Riley Wolfbauer. This is our weekly wrap on what happened in auto finance for the week ending August 12 2022. General economic news, US inflation cooled in July by more than expected easing some pressure on the Federal Reserve. The Consumer Price Index increased 8.5% From a year earlier down from 9.1% inch in June. That was the largest in four decades. According data from the US labor department, prices were unchanged for them from the prior month. Declining gasoline offset increases in food and shelter costs. The US car CPI dropped 0.4% year over year. In automotive electric vehicles subscription service autonomy plays a $1.2 billion order for electric vehicles totaling 23,000 units from 17 Different automakers. According to published reports, the EVs in the order must have an MSRP range of 26,600 to approximately 122,400 and a minimum battery range of 250 miles. They must also additionally be available for purchase before the end of 2023. Autonomy is looking to diversify and grow its subscription fleet which currently consists of 1000 Tesla vehicles. The order includes EVs from an number of OEMs including BMW canoe, Fisker, Ford, General Motors, Hyundai Lucent group, Mercedes Benz, Pollstar, rivian, still Lantis Subaru, Toyota Motor, Volvo, car and Volkswagen. The order comes on the heels of its partnership with auto nation who will serve as the dealer of record for the subscription company to place the orders with the OEMs and handle maintenance, repair and reconditioning of the vehicles for subscription. Speaking of electric vehicles, rivian automotive closed out its second quarter closed out second quarter earnings, and reaffirmed his production guidance for the full year despite protracted supply chain constraints as preorders continue to ramp review and double down on the expectation that it will produce 25,000 units by the end of the year. In q2, the OEM produced and delivered more than 4400 vehicles across its R one T r one s and commercial Edie v 700. Vehicles. In auto finance, our top stories last week cover new technology investments and leasing moves. Amanda, kick us off on the technology front. Sure.Amanda Harris 02:41 So we have a little bit of an update from US Bank and flagship Credit Acceptance. So I'll just start with US Bank. So we have followed, they've been working on launching real time payments for a while now. So they launched real time payments for auto dealers recently. So they that will accelerate funding time and basically allow dealers to access loan funds, anytime so outside of normal business hours on the weekend, any day of the year, including holidays, which is obviously a big benefit for the dealers, it gives them more control over cash flow. And it obviously speeds funding, which we all know is a really big sticking point for dealers. So the US Bank launched real time payments before now with Lithia motors, digital retailing arm, driveway back in April, those payments were specifically sent to sellers. And that's the speed the funding for the sellers. But that sparked the interest of auto dealers who also wanted to take advantage of these real time kind of immediate payments for loans. So the bank launched those for dealers gotten really, really positive response. They've been offering them since about October last year, which followed a pilot so they started with about 20 dealers in June. And now they have more than 800 dealer partners that are using real time payments. So just immediately sparked interest. The bank does believe that real time payments will be a major part of the industry in the future, just as more financers offer them. So we'll kind of you know, follow that and see it's a new, it's a new thing is driven by technology. It's something that you know, allows dealers to get immediate access to loan funds, when they would normally have to wait, you know, at least couple days. So that's on one side. Flagship Credit Acceptance is also using new technology. So they are expanding into direct to consumer lending through an equity investment in automotive e commerce technology provider blinker. So subprime lender flagship is going to integrate linkers loan origination technology which is powered by artificial intelligence and machine learning. And essentially the tech allows customers to apply for and complete financing online. So on top of AI machine learning blinker also uses what's called vision technology. And it essentially is a camera that allows customers to upload photos of their vehicle, their documentation, such as their identification, they can verify their identity. So the camera can use technology to their face. So they can verify they are who they are to match their driver's license. And they can upload all their financing documentation online. And this is all can be done via a phone. So that's the main avenue is the smartphone mobile technology can be done, obviously, on a computer as well. But that's the idea is that they can do all this on their phone. So flagship, historically is purchased direct loans from lending partners, but with this technology, they're going to be actually able to do direct to consumer lending. And they will be originating and servicing the loans themselves, they have a couple of different avenues they use for capital, abs market is a big one, they have a paralyzed house line of credit. So they're using those to actually originate the loans themselves versus using this kind of purchasing Avenue, they have been on top of what they do in the indirect space. So indirect financing not going away, still about 80%, originations with through the indirect channel, they will keep all their dealer relationships, all the relationships with third parties that they purchase from none of that's changing, as far as I'm aware. But this is just another avenue for them to do direct lending to consumers mainly and refinance for now. And then they might expand that later. So that's what we have going on. Right? IJoey Pizzolato 06:23 think both of them both of these moves, highlight sort of two key elements of the market right now. One on one hand, you have time to funding for dealers, right? We have we have a whole environment where car sales are going down. So how do you get your product in front of the competition, and a lot of that is going to have to do with time to funding. So I would I would imagine, you know, we're going to see a lot more lenders kind of follow suit in terms of spinning up their funding, we already have been seeing that. And then of course, on on the flagship side, again, getting your product, different avenues in front of different consumers rather than just sort of relying on indirect business, I think will continue to play a key role until again, we're back to that production ramping back up to normal time. Speaking of new opportunities and getting your product in front of new consumers, Riley what's going on in leasing front?Riley Wolfbauer 07:23 Yeah, so I'll start with affinity Federal Credit Union. The credit union is New Jersey's largest credit union, and it announced a partnership with credit union leasing of America, which the partnership began in April, and it gives affinity the ability to offer vehicle leasing using kuils platform. So cool is Platt cooler handles the analytics, insurance operations and the compliance side of the leasing program for all of its credit union partners. Kula has now including affinity has 34 credit union partners, affinity originated 274 leasing contracts through coulis platform in July, which is up 8.7% From June. The credit union is tracking towards around 300 leases in August, and hopes to eventually reach 1000 leases per month. Kula originated 50,000 leases with all of its credit union partners in 2021, which is a single year record of $2 billion and is on pace for an increase in 2022. This is another indicator that credit unions are grabbing a market share as they offer longer loan terms and lower rates to drive originations. Now over to TD autos partnership, they inked a partnership with online end of lease platform lease and to finance lease buyouts on the digital platform. TD auto went live on the east side platform in late July and joined ally financial capital 1/5, third PNC and Westlake Financial as partners on the platform. So Leeson is a third party platform that provides lessees the ability to digitally complete the lease and process without having to step foot into the dealership. Lisa and is just started in February 2021. And they are continuing to grow as the number as they have doubled the number of lease buyouts facilitated every six months since it launched. The platform facilitated 548 lease buyouts in July and is on pace to facilitate about 760 In August, the number of lessees who buy out their vehicle has increased with the continued high value we have used cars and low new inventory that has continued in industry. Joey Pizzolato 09:50 Well, again, on point with with trends we're seeing really, you know, that's a this is another avenue for banks in particular who Don't get into lease to you know, ramp up, you know their their loan originations if they're if they're financing these lease buyouts so, you know another another trend that we're gonna keep keep an eye on on the leasing front. There's really no indication when leasing will get back to, you know, a normal scenario as as it were in the pre pandemic levels with inventory being the way it was. Well, that about does it for today's episode. Thanks for joining us on the roadmap and follow us on Twitter and LinkedIn. We will see you online at auto finance news.net and here next time

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