Market turmoil continued last week, with Fifth Third pulling out of the indirect car business in western states, falling EV prices and rising negative capital on used-car loans.
Fifth Third is retreating Indirect Lending in Western States When trading volumes are low, a company spokesperson confirmed: auto finance news. Local banks are reviewing their indirect auto strategies, Citizen Financial exits auto business entirely last month.
In this episode of “Weekly Wrap,” Auto Finance News Editor Joey Pizzolato, Senior Deputy Editor Riley Wolfbauer, and Deputy Editor-in-Chief Johnny Martinez discuss the top stories and what’s to come for the week ending June 30. Discuss what to expect during the week.
ofBig Wheel Auto Finance Data 2023 Reportis the only summary table currently available for the top 200 auto finance companies by balance.
Editor’s Note: This transcript was generated by software and is provided as is. Some transcription errors may remain.
Hello everyone. Welcome to Auto Finance News Roadmap, the nation’s leading auto financing and leasing newsletter since 1996. Monday, July 3rd, I’m Joey Pizzolato. Featuring Riley Wolfbauer and Johnny Martinez. Here’s a weekly roundup of what happened in auto finance in the week ending June 30, 2023. In general economic news, optimism about the labor market and economic expansion increased, pushing US consumer confidence to its highest level since the beginning of the year. The Conference Board index rose to 109.7 in June from 102.5 in May, beating expectations in a Bloomberg survey of economists. The group’s current index jumped to 155.3, the highest level in nearly two years. In the auto industry, Rosetown Motors filed for bankruptcy last week. The move follows a long-running dispute with iPhone maker Foxconn Technology Group over a contract to build pickup trucks for Rosetown and an assembly plant in Ohio. The Taiwanese manufacturer said it was preparing to pull out of the production tie-up, and warned that the Eevee startup could fail without additional capital. In auto finance, Fifth Third withdrew from indirect auto financing in some western states last week after declining auto lending, but the bank has not exited indirect auto or specialty financing. A spokesperson for the company told Finance News that it was rather a quote, mostly Western saints outside the five-thirds range of the quoted range, and cut back to reduce the origin. Based in Cincinnati, Fifth Third provides indirect auto financing in all states except Alaska, Hawaii, Louisiana, Wyoming, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, South Carolina, Ohio, It has offices in Tennessee and West Virginia. Five-thirds fell back last month after the public withdrew from indirect vehicles. Citizens set the price for a $1.5 billion asset-backed securities deal on June 23, with strong demand from investors pushing the deal down. Citizen Financial Group plans to sell more bonds backed by prime auto loans following the first such transaction. Bloomberg reports that after the company’s exit, auto finance will likely continue to dwindle after the loan, as the public plans to issue three to five more bonds backed by its $11.5 billion auto loan portfolio in the electric vehicle space. It is prioritizing new electric car loan products over its non-prime offerings, the people said. The company has entered into a new partnership with climate finance company Tennant, which supplies Eevee products to the Solaris indirect dealer network. So our auto finance will provide tenants with loans that include chargers and charger installation financing to our Texas dealer network in California, Colorado, Oregon and Washington. The move, which chief executive Ken Morrell said he plans to curb sales of non-prime products, marks Tennant’s first foray into indirect auto financing, which it launched in May for small businesses. This follows the commencement of commercial fleet financing. Advertisement prices are falling as supply recovers, and drug companies know the details. Riley Wolfbauer 3:29
In the second quarter of this year, the average retail price of the new Evie dropped to just over $55,000. That means she’s down 15% year-on-year. And this is very important in EV. Because, as we all know, high prices are one of the biggest barriers to consumer adoption. So as these prices drop, consumers may follow suit and adopt electric vehicles at a faster pace. These price cuts were largely driven by the large amount of inventory available for EVs. Supply of new Evie in the second quarter reached 92.2 days, up from 35.8 days in the same period last year. So EVs are stuck at 92 days in the second quarter, and for reference, all new car supply is stuck at 51 days right now. So, Evie supply far exceeds internal combustion engine supply at this point. So we’ve seen Evie companies slash prices and/or lower suggested retail prices in an effort to move vehicles around and stay competitive and drive sales, but Tesla is the first to do it and will be 2022. I believe Ford followed in December 2012. Tesla. And now, Hyundai is the latest manufacturer to slash the price of his Evie, dropping the Aeon 6 sedan his $5,000 price tag. This overflow of inventory will force these OEMs to shift supply, which could lead to price declines in the future and an increase in EVs’ share of sales. Joey Pizzolato 5:31
right. And as you know, when it comes to falling prices, falling used car prices are pushing up the used car loan-to-value ratio. Riley, what’s going on there? Didn’t you also report on this last week?
Riley Wolfbauer 5:45
Yes, as you just said, the loan-to-value ratio at origination has increased over the last two years. As such, consumers will find themselves in greater negative capital, and higher loan-to-value or loan-to-value ratios at origination will indicate where there is softening in the portfolio and where lenders may experience increased delinquency. seems to indicate Therefore, the average loan-to-value ratio for used car originations jumped to 125% in Q1 2023. By comparison, in Q1 2022 he was 110% and in Q1 2021 he was 104%. These elevated his LTVs are concentrated in the subprime risk tier. Average implied negative capital at origination with these high LTVs reached $6,700 in the first quarter. This is a 348% increase compared to Q4 2021. So, as we said before, the LTV is high, indicating that the origination is at greater risk of delinquency. . So the used car loan in the portfolio started 12 months after him, with an LTV of 140%, and the 60-day delinquency rate from 2018 to 2021 was over 7% against his 5%. LTV is between 125% and 139%. Also, loans with LTVs between 100% and 124% have a delinquency rate of 4%. So, we can see that as the LTV increases, so does the probability of being delinquent. So this could be an indication that some subprime portfolios are soft. Overall, though, the portfolio is generally healthy, but more focused on the subprime sector, where lenders need to be concerned.
Joey Pizzolato 7:58
Great, thank you Riley. Powersports season brings more RV news. Johnny Martinez has the details.
Johnny Martinez 8:07
That’s right, powersports financier IronHorse’s funding has expanded to include RV financing and refinancing. In addition to direct consumer finance and camper and RV refinancing, the company announced that it will also provide indirect areas to better understand what is happening directly to consumers in loan refinancing. This builds on what they’ve been building side by side since they started in earnest, with ATVs, motorcycles and watercraft, and even expanded to include motorcycles and watercraft earlier this year. And that’s just seeing some companies grow in this space and get more involved in RV financing or getting involved in RV financing. They’re not the only ones we’ve seen doing such things lately. Octane lending last August he entered RV lending and US Bank entered omnichannel RV lending in April this year. I mean, we’re seeing more and more companies wanting to complete that space under the powersports umbrella just like we’re rolling it out on our site. Companies hope these he falls into all four buckets. And this is just like an iron horse going in that direction, and speaking with their CEO, you can see that it’s always been and is part of the long-term vision of the company here. This is where they are now, and with this his RV market kind of solidifying, especially since COVID-19, another person is getting into these more fundraisings in his RV space. .
Joey Pizzolato 9:36
right. Thank you Johnny. That’s it for today’s episode. Thank you for joining our roadmap. Follow us on Twitter and LinkedIn.See you next time online and Auto Finance News.net and here
https://www.autofinancenews.net/allposts/risk-management/podcast-weekly-wrap-on-fifth-third-pullback-ev-financing/ Podcast: Fifth Third Rebound, ‘Weekly Wrap’ on EV Funding