Weekly Wrap on powersports, tech

Powersports lenders project mixed origination volume in 2024 as credit unions and regional banks pull back in the space and consumer application quality declines.  

Octane strategically kept origination volume flat year over year in 2023 but expects to increase originations this year as well as grow its dealer base.  

FreedomRoad Financial’s origination volume has been down since January as consumers are carrying more debt, leading to lower approval rates. 

Meanwhile, financial institutions are continuing to invest in technology to improve the origination process and customer experience.  

In this episode of the “Weekly Wrap,” Auto Finance News Deputy Editor Amanda Harris and Senior Associate Editor Riley Wolfbauer discuss the top trends during the week ended March 15.  

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Registration is now available for the annual Auto Finance Summit East 2024, May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross section of industry players. Visit AutoFinance.Live to learn more.  

Transcript:  

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

Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter on automotive lending and leasing. It is Monday, March 18. And I’m Riley Wolfbauer joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending March 15 2024. In economic news underlying US inflation topped forecast for a second month in February as prices jumped for use cars, air travel and clothing, reinforcing the Federal Reserve’s cautious approach to cutting interest rates. The core consumer price index increased 0.4% From January and 3.8% year over year. overall CPI was boosted by rising gas prices increasing 0.4% month over month and 3.2% year over year. Core CPI over the last three months rose an annualized 4.2%, which is the most since June. At the same time, consumers are being pressured by interest payments, as many consumers are carrying more debt as they rely on credit. delinquency rates on credit cards and auto loans are the highest in more than a decade. And for the first time on record, interest payments on credit cards, auto loans and other non mortgage debts are as big of a financial burden for US households as mortgage interest payments. interest payments by US households for non mortgage and mortgage loans are nearly $600 billion, according to the Bureau of Economic Analysis. In auto industry news commercial electric truck manufacturer workhorse has cut 20% of its death and is working to shore up funding to maintain operations amid market challenges. workhorse faces concerns about its ability to continue without successfully improving liquidity and working capital requirements over the next 12 months. According to the company’s 10k filing from last week. The potential financing arrangement is expected to carry a higher capital cost than workhorses current arrangements. The OEM is negotiating with multiple financers and plans to close the transaction in the new in the near future to build necessary liquidity in powersports rumble on reported fourth quarter earnings last week, the retailer completed the sale of its finance portfolio in an effort to reduce debt, Rumble and close the sale if it’s fine as portfolio to clear haven 2021 trust a Delaware statutory trust for $17 million, according to a January 4 8k filing with the Securities and Exchange Commission. The company in q2 2023 had announced its intention to sell the finance portfolio RumbleOn has reduced its debt by $142 million overall, and has further reduced it by $33 million. So far this year. The company’s non vehicle net debt stood at $218.5 million as of February 29. Chief Financial Officer Blake Lawson said on the company’s earnings earnings call the retailer’s finance. Insurance revenue declined in q4 as retail sales decreased f&i revenue came in at $27.4 million in q4, which was down 8.7% year over year for the full year 2023 f&i revenue was 117 million down 5.2% year over year. Meanwhile, origination volume at powersports lenders has been mixed so far this year. Octane lending is projecting a 15.4% year over year increase in originations to $1.5 billion dollars in 2024. After originations were flat year over year, in 2023, at $1.2 billion, the lender strategically kept originations flat. Chief Executive Jason Guss. Told Auto Finance News he said this year they will be able to grow through onboarding new dealers, deepening penetration and getting the benefit that regional banks and credit unions have continued to pull back a little bit due to liquidity issues. Premium road financial however, has tallied flat two down origination since January and expects that trend to remain for the year. Executive Vice President and managing director Tom Collins told AFM the dip in new business volume comes despite an increase in application volume. The biggest driver is that consumers are holding more debt than they were before which is leading to falling approval rates Colin said Riley Wolfbauer 4:23 in auto finance room reported earnings last week and the company has paid the balance on its four plan facility with Ally financial by selling nearly all of its used vehicle inventory and cutting staff room expects to complete the wind down of its e commerce business by the end of the first quarter. The company ceased its e commerce Sales and Use vehicle dealership businesses in January due to liquidity concerns but it remained buddy retained its finance arm United Auto credit Corp along with retail analytics platform Karcher story room employed just under 1700 people as of December 31, and of that total Riley Wolfbauer 5:00 uacc had just under 700 employees and car story had more than 200. Staff cuts began in January that will affect approximately 800 employees in connection with the wind down, shutting 93% of employees not involved in uacc, or car story operations, rooms retail financing segment, gross profit, gross profit, which includes UAC, operations, Rose 3.4%, quarter over quarter, and 16% year over year to 33 point 4 million in the fourth quarter, but declined 9% year over year to 125 million for the full year. Last week, Amanda covered some tech initiatives that are going on across the industry. So Amanda want to hop into those details a little bit. Yeah, sure. So room kind of hints at it. But there’s you know, a lot of competition going on in the market, right with E commerce and digital. So that has prompted, you know, almost every single company that does any kind of lending, right to really look at their technology stacks, kind of see how they can be more creative. We know coming out of the pandemic, there was a lot of like internal kind of looking at processes, seeing how they can be improved customer experience can be improved. When it comes to digital. And we know more customers expect more digital experience or like for more the experience to be done online before they even go to the dealership, that’s been a trend for a while, kind of heightened a little bit more from the pandemic because more people obviously had to do that. And then there’s just been a little bit of a shift. So along with that, a couple of lenders specifically are doing some new things. So Navy Federal Credit Union, is actually looking to develop an omni channel like lending platform, basically allowing their members to, you know, apply for financing and do all the financing and servicing experience kind of the same regardless of what channel they’re using, whether it’s your phone or computer, and things like that. So they’re working on kind of like building that out. And kind of developing that. So there’s a time there’s not a timeline specifically yet for when that will launch, but it is something that they are working toward, which is part of a bigger, just focus on technology overall. And we’re seeing that with others as well. Of course, Carvana, we know has been digital from day one to you know, they have seen that kind of play out and the benefits of being digital and having things like E contracting in place having omni channel, Pentagon Federal Credit Union also consistently investing in, you know, innovation and technology, moving their legacy systems on to new platforms, we’ve seen plenty of lenders, these included moving more processes over to the cloud, we see no that kind of trending as well, just as more and more customers expect more of the processes to be done digitally, they kind of have to have the processes in place. And part of a big part of that is moving things to the cloud, you can actually, you know, move all your things over and get all those Amanda Harris 7:59 those online pieces in place to be able to offer like an omni channel experience. So this has been happening, like captives are also doing more of the process digitally allowing consumers to kind of look at cars and monthly payments and things like that ahead of time before they get to the dealership. It’s a big focus for banks, as we know, banks are very digital in other aspects and you know, moving that into the auto side, too. But it’s definitely something that more and more lenders and lender types in our industry have recognized as crucial and necessary in order to compete against, you know, everyone else in the industry as well. So we’ll see more and more technological innovation happening. I’m sure we’ll see more people kind of upgrading their systems or launching new LMSs or unless it’s on origination systems, moving things to the cloud, things like that. So just a wave of what can kind of continues happening as consumers want to do more online. Riley Wolfbauer 8:52 Yeah, and we’ve continued and because of this, we’ve continued to see contracting, be on the rise. And so I don’t think anybody’s expecting the technological innovation to slow down. No. Alright, so that about does it for today’s episode. Tune in this week for more news from around the industry. And thanks for joining us on the roadmap and be sure to follow us on acts formerly known as Twitter and LinkedIn. We will see you online at auto finance news.net and here next time