Podcast: ‘Weekly Wrap’ on leasing, HOG earnings 

Amanda Harris: 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, July 29, and I’m Amanda Harris. . This is our weekly wrap on what happened in auto finance for the week ending July 26, 2024. .

In economic news, the Fed could be setting the state for a quarter-point rate cut discussion at its meeting later this week, with a cut likely toward the end of the year. . A survey conducted by Bloomberg indicated economists believe rates will be kept unchanged at this week’s meeting. .

In auto finance, last week marked the continuation of second quarter earnings with the captives, with Ford Credit and GM Financial reporting portfolio growth. .

Ford Credit and GM Financial’s outstandings increased by 8% year over year to $85.6 billion and 2.3% YoY to $103.6 billion, respectively. .

Ford Credit’s earnings before taxes, however, declined 10% year over year to $343 million. . The captive paid a $150 million distribution to Ford Motor, marking the first distribution since Q3 2022 when Ford Credit paid $500 million to the OEM. .

Leasing was key to GM Financial’s origination volume in Q2. . The captive’s lease originations rose 8.7% year over year to $5 billion while the percentage of U. .S. . General Motors sales that were leased sat at 16.6% in Q2 compared with 17.2% in Q1 and 16.3% in Q2 2023. .

Dealers are leaning on leasing to drive sales as consumers look for ways to lower their monthly payment amid high interest rates and elevated car prices. . Monthly payments sit at over $700, but leases tend to carry a payment roughly $100 lower. . Lenders such as Ally Financial and US Bank are also seeing a rise in leasing volume, driven in part by EVs. . Our full feature on the impact of leasing and recent dealer operation interruptions is online now. .

Speaking of leasing, Stellantis is leaning heavily on its captive Stellantis Financial Services, which was formed in 2021. . The focus on growing the captive’s portfolio has prompted Stellantis to no longer incentivize leasing other lenders’ leasing options, essentially removing incentives from leases outside of those financed by SFS. .

I spoke with a Stellantis dealer who told me in depth how challenging this change makes it for dealers to compete on leasing, which makes up nearly half of Stellantis Financial Services’ volume. . The inability to apply deals to leases that don’t qualify under SFS’ parameters, which target certain vehicles and consumers who are already in a Stellantis lease, has contributed to sales challenges and growing supply on dealer lots. .

This also impact’s Stellantis’ setup with Santander Consumer USA, who as Chrysler Capital has provided private-label financing for Stellantis since 2013. . Chrysler Capital too isn’t able to offer the same level of incentives for consumers and unsubvented cash rebates can no longer be applied to lease transactions not financed by Chrysler Capital, an option that before allowed for sales flexibility, the dealer told me. .

However, one could argue the shift to growing the captive is working. . SFS’ portfolio reached $10 billion in Q2, meeting the target the manufacturer originally set for yearend. . Stellantis isn’t likely to change its position on incentives anytime soon and is closely monitoring supply situations, leadership said on the company’s earnings call. .

Turning gears but still on leasing, Tesla’s leasing penetration declined in Q2 amid more competition from automakers putting their own EVs in the market. . Leased Teslas accounted for 2.3% of total deliveries compared with 2.2% in Q1 and 4.7% in Q2 2023. . Deliveries rose 14.8% quarter over quarter but declined 4.8% YoY to 443,956 units. . Tesla also saw a dip in its market share to below 50% for the first time to 49.7% during the quarter. .

Harley-Davidson Financial Services also reported earnings last week. . HDFS’ originations ticked down 4% year over year, though no other details were shared. . Retail finance receivables were flat year over year at $7 billion which credit losses rose. . Operating income improved driven by a dip in provision for credit losses and revenue rose 10% year over year to $264 million. .

LiveWire, Harley-Davidson’s electric motorcycle manufacturing subsidiary, sold 158 units in Q2, up nearly 380% year over year. . Revenue and operating losses both decreased. . Of course, more details are available on our site. .

That about does it for today’s episode. . As a reminder, registration is open for the 2024 Auto Finance Summit and Powersports Finance Summit returning to Vegas in October. . More information can be found at autofinance.live. .

Thanks for joining us on the roadmap and be sure to follow us on X and LinkedIn. . We will see you online at autofinance news.net and here next time.