Third-quarter earnings were mixed again, with some captives reporting increases in new business while others recorded declines. Credit performance deteriorated overall.
GM Financial’s lease and loan originations totaled $14.3 billion in the third quarter, an increase of 3.6% year-over-year due to a 14% year-over-year increase in lease originations. Meanwhile, Lithia Motors’ captive arm Driveway Finance Corporation’s origination amount increased 3.2% year over year to $518 million. .
Other captives also reported declines in originations, including EV automaker Tesla Finance, whose lease portfolio fell 12.1% year over year to $5.4 billion, and Harley-Davidson Financial Services, which saw originations fall 11%. Chief Financial Officer Jonathan Root said at a press conference. Company financial report.
On this episode of “Weekly Wrap,” Auto Finance News Editor Amanda Harris and Associate Editors Ashley Savage and James Van Bramer share key takeaways from third-quarter captive and powersports earnings. and discuss the main themes of Auto Finance Summit 2024.
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Editor’s note: This transcript was generated by software and is provided “as is.” Some transcription errors may remain.
Amanda Harris 0:28
Hello everyone. Welcome to the roadmap of auto finance news. The nation’s leading news on auto loans and leases since 1996.
On Monday, October 28th, Amanda Harris will be joined by Ashley Savage and James Van Brimer. This is a weekly roundup of what happened in auto finance for the week ending October 25, 2024.
In economic news, U.S. consumer sentiment rose to its highest level in six months in October, as households became more optimistic about purchases due in part to lower financing costs following the Federal Reserve’s interest rate cut last month. .
According to the University of Michigan and Automotive News, October’s final sentiment index rose to 70.5 from 70.1 the previous month. The Fed’s interest rate cuts have not yet stimulated demand for auto sales.
Auto dealers reported that sales were mostly soft or steady in mid-October, according to the latest edition of the Federal Reserve’s Beige Book.
In terms of performance, the overall credit performance of securitized auto loans continues to deteriorate year-on-year, but has improved from the previous quarter, according to Crowbon Ratings. Latest Auto Loan ABS Index Report.
For prime securitized loans, the 30-59 day delinquency rate was 1.21%, an increase of 8 basis points year-over-year, but a decrease of 7 basis points month-over-month.
Meanwhile, the 30-59 day delinquency rate for non-prime loans was 8.93%, an increase of 32 basis points from the previous year.
However, compared to the previous month, it fell by 53 basis points.
Also last week, the captive began reporting third-quarter earnings, showing early signs of mixed results. G and Financials’ loan and lease originations totaled 14 points to 14.3 billion.
This was an increase of 3.6% compared to the same period last year. This was driven by a 14% year-over-year increase in lease starts during the quarter.
The captive portfolio grew 2.5% year-over-year to $105.4 billion, and Lithia Motors’ financing arm, Driveway Finance Corporation, also originated $518 million in auto loans in the third quarter, up from a year-ago period. Increased by 3.2%.
For the year, Lithia’s finance and insurance revenue was 360 million, up 3.1% year over year, while F and I averaged total revenue.
Profit per unit was $1,803, down 11.8% from the same period last year.
Tesla Finance’s lease portfolio also decreased by 12% compared to the same period last year, as deliveries increased by 6.4% to approximately 463,000 vehicles and production increased by 9% to approximately 470,000 vehicles.
Tesla CEO Elon Musk expects sales to increase 20% to 30% in 2025.
But much of that will depend on Tesla’s ability to produce more affordable EVs.
Morgan Stanley estimates that Tesla’s sales will increase 14% in 2025 compared to the previous year.
There were also some earnings reports in the power sports sector. Report to Ashley for the latest information on the powersports market.
Take it away. Ashley Savage 3:18
Thank you, Amanda.
So last week, we highlighted the latest earnings from several companies in the powersports space, including Harley-Davidson Financial Services, Winnebago, and Clearest. We’ll start with a quick update on Harley-Davidson, then discuss Winnebago, and finally discuss Polaris. But in the case of Harley-Davidson, it’s Finan.
Services’ annualized retail credit losses increased in the third quarter, while North American retail sales declined by double digits. Exact numbers for the third quarter were not available for HDFS originations, Chief Financial Officer Jonathan Root said.
The company’s earnings call last week showed that retail originations in the quarter were down 11% year-over-year, and the company’s total retail financing receivables in the third quarter were $7.0 billion, with year-on-year and quarter-on-quarter growth in the RV and Marine segment. As usual, the manufacturer, Winnebago Industries, announced that it has stepped up its promotion. .
As a result of our larger commitments, our debt increased in the fourth quarter of our fiscal year.
Excuse us for meeting the needs of dealers and consumers in a challenging retail environment.
Winnebago’s promotional debt increased 1.7% year over year to 30.4 million in the fourth quarter.
It ended on August 31st. Our team’s analysis of the company’s filings shows that promotional debt increased 47.6% quarter-over-quarter.
Winnebago Chief Financial Officer Brian Hughes said on an earnings call that the deal will help dealers move inventory and create strong incentives for customers. Discounts and benefits were still rising in the quarter, pushing the gears up a bit, but in the case of Polaris, the company’s efforts led to worse sales in the third quarter.
Reduce year-end production and shipments by 15-20%.
Polaris Iseo Mike Spitton said on the earnings call that while these actions had a negative impact on our short-term results, they were necessary steps to support strong partnerships with our dealers. he added.
Old Firm is committed to reducing dealer inventory.
Prime Minister Blair’s third quarter sales totaled 1.7 billion, down 15% from the previous quarter and 23% year over year.
It also cited comments that appeared to reflect sentiments shared across the powersports industry, as well as the September interest rate cut by the Federal Reserve, which, while encouraging, ultimately led to lower retail sales. You can also share comments that did not have an immediate impact on demand.
That’s all I know about powersports, but I also hosted the 2024 Auto Finance Summit in Las Vegas earlier this month.
Pass it to James.
Discuss some of the main themes of the event. James Van Bramer 5:30
Thank you so much, Ashley, on your last point, you mentioned that the general sentiment at this year’s Auto Finance Summit was one of optimism for what’s to come. In 2025, auto executives are optimistic for several reasons.
Start with one.
Last month’s rate cut by the Fed, which Asch mentioned earlier, is expected to be the start of things to come, with more expected this year, but the auto industry faces tough challenges with rising car prices. was.
And rising interest rates make borrowing even more costly for consumers.
As we head into next year, better loan terms will emerge as further reductions are actually needed to lower consumers’ monthly payments.
But they are not a silver bullet for improving affordability, submod executives say.
However, there are areas in the market that suggest price easing is on the horizon. For example, rising inventory levels could mean more incentives, which is an optimistic outlook for the auto industry.
On the flight, we also heard specific opinions from industry leaders.
E vs. strikes an optimistic tone for next year.
As a result, penetration rates have improved and new car sales have actually reached record levels, with new car sales actually hitting a record 9% in September.
Adoption may not have reached the level some expected.
It was a few years ago, but few seem to doubt that the E vs is indeed the future of the auto industry.
However, tax incentives remain an important part of EV adoption.
Executives who attended the press conference said:
For example, while valuation remains a concern, Scott Painter, CEO of EV subscription provider Autonomy, says companies like ours will not be able to afford these assets unless their residual value is guaranteed. He said it is impossible to own one.
Finally, technology has once again become a top priority for trust. For example, we will launch a new platform next year to determine when is the best time to reach out to customers based on their goals and timing. The best time to contact that customer.
The industry sent a clear message at this year’s AFS that the future of auto finance includes technology.
With that, I will send my concluding comments back to management. Amanda Harris 7:43
Yes, certainly.
Just to tease you, today I’m going to spotlight one of the fireplaces.
Oh, Bank of America was on the show.
Optimism is definitely part of that technology and was part of it.
It’s clear that this theme continues to emerge in the industry, and we’re confident that all of these themes will continue to be prevalent next year as well.
So let’s follow all of this and that’s it for today’s episode.
And thank you for joining us on the roadmap. Follow us on X and LinkedIn. You can find us online at autofinancenews.net and here next time.
