Ally Financial, Chase Auto and Wells Fargo Auto all reported an increase in auto originations in the second quarter, driven in part by a pull-ahead in car purchases by consumers anxious to buy before tariff-induced price rises.
Ally Financial’s auto originations jumped 12.2% year over year in Q2 to $11 billion, while Chase Auto’s originations ticked up 4.6% YoY to $11.3 billion. But the bigger news was Wells Fargo’s auto originations surging 86.5% YoY to $6.9 billion, according to the banks’ earnings reports.
Huntington Auto Finance’s originations rose 9.5% YoY to $2.3 billion. Ally Financial and Chase Auto also reported growth in lease volume during the quarter.
Meanwhile, credit performance improved across most banks in Q2, with auto delinquencies and net charge-offs down YoY. Bank of America’s auto net charge-offs declined 3 basis points YoY to 0.17%.
Regional bank performance was mixed, with U.S. Bank’s indirect loan and lease originations down 29.1% YoY to $1.4 billion and auto outstandings up at Fifth Third Bank and PNC Financial.
Also last week, auto lenders dived into trends across automation in underwriting in the Auto Finance News webinar “Digital Strategies for Exceptional Customer Experiences.”
In this episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Senior Associate Editor Truth Headlam and Associate Editor Aidan Bush discuss trends across second-quarter bank earnings for the week ended July 18.
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Amanda Harris 0:05 Hello everyone, and welcome to The Road Map from Auto Finance News since 1996, the nation’s leading newsletter on automotive lending and leasing. It’s Monday, July 21st, and I’m Amanda Harris. This week, several large banks reported second-quarter earnings, most of which pointed to growth in auto originations. Ally Financial’s auto originations jumped about 12% year-over-year in Q2 to $11 billion, while Chase Auto’s originations ticked up about 5% year-over-year to $11.3 billion. Diving a bit deeper, Ally is focused on prudent growth. That’s a quote of its auto business, Chief Financial. Officer Russ Hutchinson said during the bank’s earnings call. The bank received a record 3.9 million auto finance applications in Q2, with Ally being selective of what loans it books, Chief Executive Michael Rhodes said. Wells Fargo’s auto originations also surged almost 87% year over year to about $7 billion. Dollars growth that comes after the bank signed on to be the preferred financier for Volkswagen, Audi and Ducati brands in the US. This quarter marked the first time in three years that ending balances in the bank’s auto portfolio grew, and that’s coming from their chief executive. Ally Financial and Chase Auto also reported growth in lease volume during the quarter as Ally saw a downtick in the percentage of lease buyouts and normalizing remarketing gains. At Chase, increased operating lease income also contributed to an uptick in auto and card service revenue. And that comes from their CFO. Credit performance across the banks were largely stable and most saw improvement across the major banks, across the quarter, across delinquencies and net losses and charge offs. We also had several regional banks report Q2 earnings and for that I’ll turn it over to Truth for the updates there. Go ahead, Truth. Truth Headlam 2:10 Thanks, Amanda. Regional banks reported mixed originations growth in the second quarter, with banks like U.S. banks seeing a 29% drop in indirect loan and lease productions, and banks like Huntington saw a 9.5 yearly increase. Sorry, 9.5 yearly increase in terms of percentage of originations. Credit performance also improved with financial years like PNC Financial and Fifth Third Bank reporting a slight improvement in delinquencies year over year. Along the lines of credit, leasing also saw an uptick in the second quarter. Leasing transactions made-up 20.5% of Q2 vehicle sales according to Cox Auto, which is about a three basis point increase from Q1 of this year. Auto leasing has quite frankly been on an upswing and further increases are expected to be seen, especially with the uptick in lease equity. Lease equity jumped 32.8% year over year in the second quarter according to the Q2. Manheim Used Vehicle Index Report that was released on July 8th. Leasing is likely content is likely to continue to increase, excuse me, while affordability remains top of mind for consumers, especially in this environment where we have tariff-related related price increase as well as inflation-related price increases. And lease penetration is expected to climb to 25% by the end of the year. At least that’s what Cox Auto expects. And in a survey by the Credit Union Leasing of America, respondents gave several reasons for why they choose leasing over regular loans or other. their financing methods. 47% of respondents said that affordability was their top reason. Top reason. And 42% said they like to keep up with technology and new cars and leasing just makes that easier. And then 11% mentioned that shorter term loans are really top of mind for them. Continuing on the topic of sales, EV dealers are expecting a surge leading up to the September 30th expiration date of the federal tax credit. Because of this, dealers are expecting used EVs and EVs as a whole to have another record quarter following the Q2. To record of 100,000 units sold for used EVs, which was an all time record. Total EV sales also had a record quarter with a 1.5 year over year growth from. January through June, which equated to about 607,000 units being sold, again according to Cox Auto. um In terms of incentives, another record was set with u With over 14% of the ATP being. Driven by incentives. I’m just gonna run that back, guys. I’m so sorry just from that EV part. Sorry. Continuing on the topic of sales, EV dealers are expecting a surge leading up to the September 30th expiration of the federal tax credit. And because of this, dealers are expecting used EVs to have another record quarter in Q2. Used EV sales set a record with over 100,000 units sold. Total EV sales also saw a record in the second quarter with a 1.5% year-over-year growth from January to June of about 607,000 units. According to Cox Auto. And then in terms of incentives, they also hit a record in June and they were about 14.8% of the average transaction price or about $8500 according to Kelley Blue Book. Now for some key takeaways from our recent. Digital Strategies webinar. I’ll turn it over to Aiden. Aiden, take it away. Aidan Bush 7:38 Thank you so much, Truth. So as Truth mentioned, I was away from earnings for most of the week, but I did get to spend time talking with some experts at U.S. bank, Lendbuzz and PNC about really their approach to automation, A I and new technologies at large. In a webinar we had last Tuesday, that replay is actually still available. So if you if you want to check the full thing out, it is on our website. But one of the key takeaways was really this focus on the automation of simple repetitive tasks. So Kristina Bolte of U.S. Bank said that they were focusing on low hanging fruit, which she defined as some of these sort of rule-based tasks that. You know, AI or not even AI, some kind of non AI automated tools could, you know, speed up or make more efficient. In a similar vein, Amitay Kalmar, chief executive of Lendbuzz, said the company has a goal of 90% automation in the loan origination process. And as of the end of quarter 2, Lendbuzz reached over 50% in large part due to its express contract tool, which uses a I to verify and approve auto loan applications. While we tend to think of generative a I as sort of the, you know, kind of hot buzzword in terms of new technologies. Both Bolte and Strati Papageorge, with PNC Bank said tools like machine learning and non a I powered automization still provide tools for growth. And when implementing those these tools, all three lenders emphasized rigorous testing. Papageorge mentioned this sort of test and learn method as well as this champion challenge. Model where you take sort of the existing tool or strategy to get a problem done and compare that with a new kind of challenger model to see what is most efficient. Ultimately, if issues do arrive once these new technologies are implemented for customers or dealers, Lendbuzz, as Kalmar said, sometimes. It’s just as important to be willing to turn off the product as it is to be willing to turn it on in the 1st place. So having kind of the the courage to remove your technology from the market can be sometimes just as beneficial as implementing it. That was all for me today, so I will turn it back to Amanda for some additional takeaways from last week. Amanda Harris 9:53 Great. Thank you, Aidan and Truth. Also, last week in economic news, US unemployment benefit applications declined for a fifth straight week by 7000 to 221,000 for the week ended July 12th, marking the lowest level since mid-april. Continuing claims were stable at just under 2 million. In automotive news, tariffs continue to impact the automotive and power sports industries. Fitch Ratings downgraded Polaris’s long-term issuer default rating, which essentially serves as a benchmark for a company’s debt ratings after the company reduced wholesale shipments in 2021, continues to face tariff exposure on parts due to its. It’s sourcing from China for US factories and is working to put cash toward reducing its debt. Tariffs have also factored into recent Fitch rating downgrades for Nissan Motor and Solantis. Companies that already face challenges due to slower demand, which is particularly impacting the power sports space, are being hit harder by tariffs.Santis today actually reported first half earnings, which show that North American shipments fell 25% year over year to about 322,000 units, and the company reported a net loss of about $2.7 billion. So we’ll keep a close eye on how tariffs continue to impact the industries going forward.