July 14, 2024
News

Podcast Recap: CDK Attacks and Powersports News – The ‘Weekly Wrap’

Car dealerships are relying on manual processes after consecutive cyberattacks on software provider CDK Global last week.

Dealers are finding workarounds to complete financing operations and other processes due to the cyberattacks that have caused service interruptions. CDK has indicated that it may take days to resolve the issues. In the meantime, some companies are offering alternative solutions for dealer management systems.

Last week, CarMax Auto Finance launched its first nonprime auto asset-backed securitization deal as part of a strategy to increase financing in lower credit tiers.

Moreover, Chase Auto has ceased financing Fisker vehicles as the EV startup filed for bankruptcy, leading dealers to halt sales.

In the powersports industry, RV and marine manufacturer Winnebago Industries saw a 26.4% decrease in promotional liabilities year over year in the third quarter of fiscal 2024. This was attributed to sluggish demand for RVs due to high costs and interest rates.

In the latest episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris and Associate Editor Ashley Savage discuss the recent cyberattack incidents, earnings updates, and powersports financing for the week ending June 21.

Subscribe to “The Roadmap Podcast” on iTunes or Spotify, or download the episode.

Transcript:

Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.

Amanda Harris 0:23 Hello everyone and welcome to the roadmap from auto Finance News.
Since 1996, the nations leading newsletter on automotive lending and leasing, it is Monday, June 24th, and I’m Amanda Harris, joined by Ashley Savage. This is our weekly wrap and what happened in auto finance for the week ending June 21st, 2024 and Automotive News. Bank of America predicts under his car Wars report analysis that EV sales penetration could reach as high as 25% in 2027, with near term sales and penetration challenged by slow demand and little incentives for manufacturers to push the EV transition and auto finance. Car dealerships are leaning on manual processes following consecutive cyberattacks against dealer software provider CDK Global last week. Dealers have been forced to find workarounds and lean back on paper based processes to complete transactions while CDK works to restore operations following what the company deemed was a ransomware attack. The hacking group demanded a ransom of 10s of millions of dollars from CDK, which is the company was planning on paying cording to Bloomberg reports. Registration could take several days per CDK. Our nation group on automotive Lithia Motors, Pinciana motive and Sonic Automotive all file disclosures with the US Securities and Exchange Commission on Friday warning of potential financial impact. The CDC’s interruption. All five dealerships use CDK Global group. One immediately activated cyber incident response procedures following the attacks and proactively took measures to protect and isolate IT systems from CDK’s platform after services were interrupted for the group’s US dealers, according to Group One released today. The group confirmed that dealerships continued to sell vehicles during the outage. In the meantime, multiple software providers are promoting their systems as alternatives to keep operations running. Data and payment analytics provider market SCAN, which is part of SMP global mobility, is promoting its in desking solution to allow dealers to continue writing deals and offering payment options to consumers. What’s like financial also is promoting a free trial of dealer management system dealer Center for dealers impacted by the CDK attacks. We are, of course, following the situation closely, both those technology providers have emphasized that they are not looking for new business from this, but are hoping to help dealers continue operations while CDK gets things back up and running.
Also last week, CarMax Auto Finance issued its first ever nonprime auto asset X securitization deal as the lender and retailer looks to increase financing penetration and lower credit tiers. CAF issued a $625 million ABS transaction backed by subprime loans on during June 18th as a lender plans a separate nonprime and prime issuance is moving forward to support better financing penetration and originations growth and nonprime CAFs total penetration rate was 45.3% in Q1 compared with 45.5% a year prior. What Tier 3 penetration which reflects third party lenders to whom CAF pays a fee to originate loans was 7.5% in Q1 compared with six point 7% a year ago. Coverage generated $2.3 billion during the quarter, down 3.2% year of a year as affordability challenges hamper application volume switching gear gears on the heels of Fisker Switch to a dealership model and bankruptcy filing. Chase Auto is no longer financing Fisker vehicles and dealerships stopped sales late last week, we’ll have more updates on that as they come. We also had several updates in the powersports market last week, and Ashley has those details. So Ashley. Ashley Savage 3:53 Yeah. Thanks, Amanda. As you mentioned, we had a lot of power sports coverage last week as we shared roundups on everything from loan approval rates and origination activity to inventory levels and promotional offerings. To start, we’re seeing that loan approval rates are down across the powersports sector. Despite higher origination volumes as affordability concerns and rising consumer debt continued to hamper deals from what we’ve heard, lenders are seeing more applications come across. But the deals are not being funded. We spoke with Tony Altieri with the national Powersports auctions and he explained that funded rates are being driven down in part by consumers applying for a loan, only to be disappointed by the rate and monthly payment offered for the vehicle. He explained how consumers are often sticker shocked when they go into the deal expecting a $300.00 a month payment, but end up with an offer for like $400.00 or more due to rates that to income ratios are also at play here. And Tony even describes him as being out of whack and driving down the number of deals lenders are funding. He said that to income ratios continue to be a challenge and something that Windows cannot get over the hurdle on. Also last week, RV and marine manufacturer Winnebago Industries released their earnings for Q3 of fiscal year 2024, which ended May 25th. As reported in their earnings, the company decreased its promotional liabilities in Q3 as the company continued to navigate a sluggish retail environment in Q3. They’re promotional liabilities dipped 26.4% year over year to 20.6 million, the company’s president and chief exec Michael happened the earnings call last week, reiterated something that we’ve also seen in the auto industry. Excuse me, what does that dealers are still cautious about their orders and promotional activity has remained elevated. RV retail demand during the quarter was both inconsistent and sluggish as consumers continue to navigate elevated interest rates and pockets of persistent inflation have said then on the inventory side, inventory levels have normalized for some powersports dealers but remain elevated for others. Further curating a mixed sales performance for retailers in May. In fact, 45% of powersports dealers indicated that inventory levels were too high across all product segments in May, down from 50% reported for three consecutive months prior, according to BMO Capital Markets may dealer survey, which was published on June 10th. For context, the survey polled 45 power sport dealers. Still, 48% of respondents said inventory levels were about right, while 7% reported that inventory levels were too low. Industry wide fluctuations in inventory levels and promotional offerings field mixed sales growth results in May. The ammo survey indicated that 51% of dealers saw sales decline in may, up from 47% in April. Sales declines ranged from nearly flat to down more than 20%. Additional coverage on the powersports sector is set to run this week and in other news, the power Sports Finance Summit agenda is live now. The 2024 Power Sports Finance Summit will be held October 9th to the 10th at Wynn Las Vegas and serves as a forum for companies involved in the finance of motorcycles, jet skis side by sides and other specialty vehicles. The 9th annual event invites invites attendees to join powersports leaders for deep dive sessions. High impact networking and exposure to the latest in lending technologies and strategies tailored to the powersport market. S unique dynamics and need a full look into the agenda is available on our site, joined by our Early Bird registration, which has also live now. That’ll wrap up our latest on the powersports sector. Amanda Harris 6:58 OK. Thank you, Ashley. Alright. Well, that’s we’ll do it for today’s episode. I thank you for joining us on the roadmap and be sure to follow us on X and LinkedIn and we will see you online at autofinancenews.net and here next time.

Subscribe to “The Roadmap Podcast” on iTunes or Spotify, or download the episode.

Transcript:

Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.

Amanda Harris 0:23 Hello everyone and welcome to the roadmap from auto Finance News.
Since 1996, the nations leading newsletter on automotive lending and leasing, it is Monday, June 24th, and I’m Amanda Harris, joined by Ashley Savage. This is our weekly wrap and what happened in auto finance for the week ending June 21st, 2024 and Automotive News. Bank of America predicts under his car Wars report analysis that EV sales penetration could reach as high as 25% in 2027, with near term sales and penetration challenged by slow demand and little incentives for manufacturers to push the EV transition and auto finance. Car dealerships are leaning on manual processes following consecutive cyberattacks against dealer software provider CDK Global last week. Dealers have been forced to find workarounds and lean back on paper based processes to complete transactions while CDK works to restore operations following what the company deemed was a ransomware attack. The hacking group demanded a ransom of 10s of millions of dollars from CDK, which is the company was planning on paying cording to Bloomberg reports. Registration could take several days per CDK. Our nation group on automotive Lithia Motors, Pinciana motive and Sonic Automotive all file disclosures with the US Securities and Exchange Commission on Friday warning of potential financial impact. The CDC’s interruption. All five dealerships use CDK Global group. One immediately activated cyber incident response procedures following the attacks and proactively took measures to protect and isolate IT systems from CDK’s platform after services were interrupted for the group’s US dealers, according to Group One released today. The group confirmed that dealerships continued to sell vehicles during the outage. In the meantime, multiple software providers are promoting their systems as alternatives to keep operations running. Data and payment analytics provider market SCAN, which is part of SMP global mobility, is promoting its in desking solution to allow dealers to continue writing deals and offering payment options to consumers. What’s like financial also is promoting a free trial of dealer management system dealer Center for dealers impacted by the CDK attacks. We are, of course, following the situation closely, both those technology providers have emphasized that they are not looking for new business from this, but are hoping to help dealers continue operations while CDK gets things back up and running.
Also last week, CarMax Auto Finance issued its first ever nonprime auto asset-backed securitization deal as the lender and retailer looks to increase financing penetration and lower credit tiers. CAF issued a $625 million ABS transaction backed by subprime loans on during June 18th as a lender plans a separate nonprime and prime issuance is moving forward to support better financing penetration and originations growth and nonprime CAFs total penetration rate was 45.3% in Q1 compared with 45.5% a year prior. What Tier 3 penetration which reflects third party lenders to whom CAF pays a fee to originate loans was 7.5% in Q1 compared with six point 7% a year ago. Coverage generated $2.3 billion during the quarter, down 3.2% year of a year as affordability challenges hamper application volume switching gear gears on the heels of Fisker Switch to a dealership model and bankruptcy filing. Chase Auto is no longer financing Fisker vehicles and dealerships stopped sales late last week, we’ll have more updates on that as they come. We also had several updates in the powersports market last week, and Ashley has those details. So Ashley. Ashley Savage 3:53 Yeah. Thanks, Amanda. As you mentioned, we had a lot of power sports coverage last week as we shared roundups on everything from loan approval rates and origination activity to inventory levels and promotional offerings. To start, we’re seeing that loan approval rates are down across the powersports sector. Despite higher origination volumes as affordability concerns and rising consumer debt continued to hamper deals from what we’ve heard, lenders are seeing more applications come across. But the deals are not being funded. We spoke with Tony Altieri with the national Powersports auctions and he explained that funded rates are being driven down in part by consumers applying for a loan, only to be disappointed by the rate and monthly payment offered for the vehicle. He explained how consumers are often sticker shocked when they go into the deal expecting a $300.00 a month payment, but end up with an offer for like $400.00 or more due to rates that to income ratios are also at play here. And Tony even describes him as being out of whack and driving down the number of deals lenders are funding. He said that to income ratios continue to be a challenge and something that Windows cannot get over the hurdle on. Also last week, RV and marine manufacturer Winnebago Industries released their earnings for Q3 of fiscal year 2024, which ended May 25th. As reported in their earnings, the company decreased its promotional liabilities in Q3 as the company continued to navigate a sluggish retail environment in Q3. They’re promotional liabilities dipped 26.4% year over year to 20.6 million, the company’s president and chief exec Michael happened the earnings call last week, reiterated something that we’ve also seen in the auto industry. Excuse me, what does that dealers are still cautious about their orders and promotional activity has remained elevated. RV retail demand during the quarter was both inconsistent and sluggish as consumers continue to navigate elevated interest rates and pockets of persistent inflation have said then on the inventory side, inventory levels have normalized for some powersports dealers but remain elevated for others. Further curating a mixed sales performance for retailers in May. In fact, 45% of powersports dealers indicated that inventory levels were too high across all product segments in May, down from 50% reported for three consecutive months prior, according to BMO Capital Markets may dealer survey, which was published on June 10th. For context, the survey polled 45 power sport dealers. Still, 48% of respondents said inventory levels were about right, while 7% reported that inventory levels were too low. Industry wide fluctuations in inventory levels and promotional offerings field mixed sales growth results in May. The ammo survey indicated that 51% of dealers saw sales decline in may, up from 47% in April. Sales declines ranged from nearly flat to down more than 20%. Additional coverage on the powersports sector is set to run this week and in other news, the power Sports Finance Summit agenda is live now. The 2024 Power Sports Finance Summit will be held October 9th to the 10th at Wynn Las Vegas and serves as a forum for companies involved in the finance of motorcycles, jet skis side by sides and other specialty vehicles. The 9th annual event invites invites attendees to join powersports leaders for deep dive sessions. High impact networking and exposure to the latest in lending technologies and strategies tailored to the powersport market.

Leave a Reply

Your email address will not be published. Required fields are marked *