Second-quarter sales of new autos were mixed following a spike in March and April ahead of tariffs taking effect, while incentives were robust during the Independence Day holiday weekend.
Most major manufacturers saw a rise in vehicle sales in Q2, with General Motors and Hyundai Motor America reporting the best first half of the year in terms of sales. June, however, marked a slowdown in sales for some automakers.
The July 4 holiday brought a mix of 0% financing and cash back offers, with incentive spend varied by brand.
Meanwhile, credit unions are putting excess lending capacity to work, evidenced by an uptick in application volume at fintech Origence, which provides technology and financing capabilities for credit unions. While application volume rose year to date through June, the fintech’s ratio of funded loans to applications fell due to higher loan-to-value ratios in the market as consumers lean on longer-term loans to manage monthly payments.
Alloya Corporate Federal Credit Union issued its first asset-backed securitization deal on July 1, a $150 million transaction backed by prime auto loans issued by Blaze Credit Union, Consumers Credit Union and Interra Credit Union.
In this episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Senior Associate Editor Truth Headlam and Associate Editor Aidan Bush discuss the latest updates on sales, incentives, funding and capital markets for the week ended July 4.
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Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Amanda Harris 0:03 Hello everyone and welcome to the Road Map from Auto Finance News. Since 1996, the nation’s leading news on an automotive lending and leasing. It is Monday, July 7th and I’m Amanda Harris. Last week we got June and Q2 sales numbers, took a look at holiday weekend incentives and dived into capital and funding trends. I’ll turn over to Aidan and Truth to share your top takeaways from last week. Aidan, you want to kick us off with some sales numbers? Aidan Bush 0:37 Sure, Amanda. Thank you so much. So as June and the second quarter really came to a close, we saw mixed sales across the major automakers. As far as some of the victors of quarter two, American Honda, General Motors, Ford and Hyundai Motor America were some manufacturers that saw year over year increases in sales. In quarter two, Ford saw the largest jump with a little bit over 14% in sales growth year over year. General Motors and Hyundai Motor America also reported that they sold more vehicles in this first half of the year than they have in previous first half of the years. That being said, many others did see drops in June or quarter two, namely Subaru, Stellantis, Mazda, North America and Mercedes. If Ford saw the biggest year-over-year growth in quarter two, then Stellantis definitely saw the biggest decline, dropping a little over 15% year-over-year. What we heard from Morgan Auto Group’s Justin Buzzell was that automakers with strong US investments were better equipped to weather tariff induced headwinds, potentially explaining that gap in sales from manufacturer to manufacturer. His strategy for dealers was to go back to the basics, build customer relationships, make sure there’s attention to detail and focus on all aspects of the. The business last weekend was also 4th of July, and with that came plenty of incentives from OEM’s, though it should be noted that some of these incentives were sort of an exception for quarter two, according to Edmunds consumer analyst Joseph Yoon. So we saw 0% APR financing across Hyundai and Nissan models, though in Edmunds report which.
Which published July 1st, actually found that 0% financing made-up less than 1% of new vehicle loans in quarter two, which is the lowest share they’ve found since 2004, according to Edmonds. Like with sales, Yoon said automakers with heavy domestic investments were better positioned to give incentives to consumers than those that weren’t. That really kind of wraps up the sales and incentives of June and early July. So I will pass it over to Truth for an update on capital funding and credit union activity.
Truth Headlam 2:38 Thanks, Aidan. So credit unions actually had their fair share of newsworthy moments last week. First, a loyal federal credit union, which operates as a credit union for other credit unions, issued its first asset-backed securities. Thanks, Aidan. So credit unions had their fair share of newsworthy moments last week. First, Alloya Federal Credit Union, which operates as a credit union for other credit unions, issued its first asset-backed securitization. Ever. Which was an auto.
Alloya’s Chief Investment Officer, Andrew Kohl, said that the company believes this is a first of its kind deal based on their research. The 150 million ABS deal is backed by loans originated by three of Alloya’s members, Blaze Credit Union, Consumers Credit Union and Interra Credit Union. Essentially, this deal will allow the three credit unions to free up their balance sheets and give them the opportunity to issue more auto loans and other credit union news. Origin’s funding ratio dropped to 19.4% in the first half of the year, a 5.3 percentage point difference from the same time last year. Application volumes, however, were up from credit unions signed on with Origins’s cuddle network, and they were up about 11.2% year over year through June. The decline in funding, despite the uptick in applicants, is partially because of the amount of risk profile consumers in the marketplace searching for loans. The pull ahead seen in March and April was from consumers in the higher credit tiers.
At least that’s what Origins’s Chief Operating Officer, Bob Childs told me. But credit unions are still likely to continue picking up share, he said. And they will continue to focus on the used market as consumers lean towards that market for vehicle affordability options. Now back to you, Amanda.
Amanda Harris 4:54 Great. Thank you, Truth and Aidan. Turning to some other news from last week and through today, in automotive news, Nissan plans to sell about $5 billion in debt to aid in the turnaround efforts on the heels of the announcement of 20,000 job cuts and the closure of seven of Nissan 17 plants by March 2028. In auto finance news, Fintech Pagaya, which purchases loans originated to its criteria from lenders, is expanding its use of Fast Pass and Best Offer products to drive higher conversion rates for lenders. Fast Pass essentially allows consumers who meet certain criteria to bypass specific stipulation. Requirements in order to get a loan during the underwriting process, for example income information. With Best Offer, Pagaya presents a counter offer alongside a lenders in real time, which allows for them to offer potentially a larger loan amount for example, or maybe better terms that can be presented to the borrower. Pagaya estimates that it increases conversion rates for lenders by up to 50%. In compliance related news, the Consumer Financial Protection Bureau published a report last month that updates its methodology for determining the number of consumers with thin file or no credit history and corrects data dating back 15. The Bureau’s original credit invisible data report, which was published in 2015, estimated the share of the adult US population considered credit invisible or those with no credit history in 2010. The CFPB began including some credit records that were previously excluded, such as records that included. Closed accounts and excluded some that were initially included in the prior method, such as inquiry only credit records that only show inquiries and not other credit history. The updated report brings the estimation of credit invisible consumers to 5.8% in 2010 from the initial 11%. And the 2020 estimate is at 7, excuse me, 2.7%. In Powersports news, boat registrations declined 18% year over year in May, while new boat inventory was estimated down 20% year over year during the month.