Auto lenders were active in the capital markets last month as credit union issuance picked up, while market share among banks and credit unions shifted in the first quarter. First Community Credit Union issued its first auto asset-backed securitization deal, bringing credit issuance over the $4 billion mark since 2017. Banks again became the leading lender type in the used-vehicle market in Q1 with 28.4% of the market compared with credit unions’ 27.98%, according to Experian. Captives held the majority share of the new-vehicle market at 61.8%, boosted by incentives. Meanwhile, rising early payment defaults indicated an uptick in fraud risk when lenders approve a deal initially rejected by a different financier. In powersports, Canadian manufacturer Bombardier Recreational Products’ North American retail sales fell 5% year over year. Motorhome values, too, fell 9.4% YoY in April while towables values declined 7.2% YoY. Recreational vehicle values increased sequentially, in line with seasonal demand. In this episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris and Associate Editors James Van Bramer and Ashley Savage discuss updates on technology, market dynamics and powersports for the week ended May 31.
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Transcript:
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Amanda Harris 0:38 Hello everyone and welcome to the roadmap from auto Finance News. Since 1996, the nation’s leading newsletter and automotive lending and leasing, it is Monday, June 3rd, and I’m Amanda Harris, joined by associate editors James Van Bramer and Ashley Savage, this is our weekly wrap on what happened in auto finance for the week ending May 31st, 2024 and Economic news, the core personal Consumption Index, which doesn’t factor food and energy costs increased .2% sequentially in April, marking the smallest advance of the year. Inflation adjusted consumer spending fell point 1%, while wage growth moderated. Gross domestic product also rose 1.3% annualized in the first quarter, below the previous estimate of 1.6% the economies main growth engine, personal spending advanced 2% versus the previous estimate of 2.5% and Automotive News. Us electric vehicle sales were flat in the first quarter, prompting 4 to scale back expansion plans and Tesla to cut 10% of its global workforce. However, six of the 10 biggest EV makers in the US saw sales growth in Q1, some in the double digits. Hyundai Kia sales rose 56% and Ford Evie sales were 86% year over year. The numbers reflect consumer demand for brands with better battery ranges and more affordable prices and auto finance. Auto lenders were active in the capital markets last month, first Community Credit Union issued its inaugural auto asset-backed securitization deal, bringing credit issuance over the $4 billion mark since 1017, when the National Credit Union administration approved securitization as a funding method for credit unions. Through May three credit union securitizers have combined to issue $1 billion of auto ABS volume, compared with $2 billion spread among seven issuers for all of 2023. Balance sheet pressure and equity concerns will likely continue to attract new credit union issuers to the asset backed curation market this year in market share dynamics, banks again became the leading lender type in the used vehicle marketing queue, one with 28.4% of the market up 79 basis points year over year compared with credit unions 27.98% which is a year over year decline of 237 basis points according to Experian, captives held the majority share of the new vehicle market at 61.8%, which is largely boosted by incentives. He also had some more insight into auto finance fraud last week. So, James, you had the details there. James Van Bramer 3:04 Yes, thank you, Amanda. We had several stories covering how fraud has impacted the auto finance industry, and last week it culminated in how it is affecting early payment defaults. Early payment defaults refers to a loan default within the first six months, which occurred on 5% of all loans in 2023, according to a May 9th report from risk management platform point predictive. These rates double to more than 10% for loans that are kicked back, which are loans that are rejected by 1 lender and then picked up by another as we previously as we previously recorded up to 70% of these loans, uh contain an element of fraud. And as you might have seen, as as you might have found interesting in our most recent story last week, lenders and dealers appear to be at odds regarding who holds the bag on these loans going bad again. In these cases, sometimes not even a single payment is made, as evidenced by the kickback figures doubling from 10 to 10% from 5%. These are also opted in. What are considered red flag indicators of fraud? But as we’ve seen in the auto finance industry, efficiency has really become a key element of auto finance. And sometimes that extra step to safeguard from fraud or even second, you know, a one to two steps, you know, safeguard from fraud, might take a little bit too long for some, you know, dealers they might not or lenders, you know that extra step kind of can go can lead to a deal from being accepted to perhaps another lender, another letter stepping in and being perhaps more efficient and quicker to the deal and ready to pounce. Of course, that said, based on these figures, that lender who White expedited deal in lieu of protecting a little bit more against fraud might have a greater fraud exposure. One last point, the piece touches on the continued risk of first party fraud, which sometimes goes a little bit overlooked as we’ve seen synthetic identity fraud really target the auto finance industry, which evidenced by some of our more recent reporting and some of the other stories. As you may have seen in the the most like the most recent piece, first party part continues to, you know, come after dealers per sorry lenders portfolios for example, income and employment fraud accounted for the largest risk to the auto finance industry at about 45% of the total exposure according to the report. So a lot going on in the in the auto finance world. So with that Ash, I know you have some more power sports. Ashley Savage 5:50 Yeah. Thank you, James. Last week we covered a few corners of the powersports world, including BRP’s earnings from the first quarter of fiscal year 2025, where we saw that retail sales had fallen 5% year over year. Executives with BRP, said it’s dealers are likely to remain cautious with respect to inventory as they continue to navigate uncertain economic conditions and high interest rates, which is a truth that transcends the world of powersports. Overall revenue for the manufacturer was down in Q1 following lower shipments as the company focuses on reducing network inventory levels and higher sales program. Also last week we covered the latest update on Motorhome and Tobo values had auction, motorhome and Tobo values fell year over year in April, but continued an upward climb sequentially, falling in line with the side excuse me, with the simultaneous increase we saw in both segments in Mark, we talked with Eric Lawrence from Black Book and he highlighted that the decrease is not unusual for this time of year as April and May tend to be more profitable for dealers due to increasing temperatures and higher demand Lawrence, made the point that not every person that comes into. Buy a new RV is gonna have a trade in and only makes sense that dealers are supplementing their used offerings at auction across the powersports market. Those are expected to face headwinds to the end of the year as affordability concerns continue to weigh on the consumer and in turn prompt a waiver promotion. We see it on the auto side and it’s the same for the powersports fire consumer is being more selective about their purchases. And Susan Medrano from Synchrony confirm this. When we spoke last week, she highlighted again that the consumer right now is picky about where they spend their money and that they’re doing their homework beforehand. Given what we know, powersport promotions are likely to remain elevated in the coming months with Polaris, BRP and Yamaha among the most aggressive and their rebates and offerings right now that’s all I’ve got for today. But you told coverage on the powersports segment is available on our site where we offer an in-depth look into the powersports inventory levels, promotions, earnings and. Amanda Harris 7:35 Fantastic great. Thank you, James and Ashley and I’ll do it for today’s episode. So thank you so much for joining us on the roadmap and be sure to follow us on X and LinkedIn and I’m going to see you online at autofinancenews.net and here next time.
