Podcast: Affordability key challenge moving into 2025 

Amanda Harris 0:17 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, December 16th. Amanda Harris, joined by James Van Bramer and Ashley Savage. This is our weekly wrap on what happened in auto finance for the week ending December 13th, 2024 and as this is our last podcast episode of 2024, I’m going to turn it over to Danes and Ashes here. Some reflections on the past year. And what’s ahead in 2025? Have James take it away. James Van Bramer 0:46 Thank you so much, Amanda. So there’s definitely several themes to discuss from 2024, but for me, compliance was definitely one of them. Obviously we had the CARS rule, which technically is still in limbo as we speak, which was just one example of this year’s of the FTC crackdown that we saw this year on aftermarket products. Speaking of the FTC, they will be having a new Commissioner. More on that in a second, but also in compliance. One of the key actions that we saw was certainly the step up in regulatory enforcement and there’s perhaps no greater example of that than the DOJ and the financial Crime Enforcement Network’s actions against TD Bank, which has. Led TD Auto Finance to pull back on commercial auto lending and prior and take the priority off less profitable portfolios after being hit with a $3.1 billion fine. Related to money laundering charges. On that note, I’d like to highlight my story from last week about the likelihood of federal regulation to come sort of come to heal under the new Trump administration. So obviously we are still awaiting for the transition of power in itself and obviously in that lens, we are still waiting for things to kind of play out well. We’ve seen the FTC, for example, but not with the CFPB, but in all likelihood there are major changes underway. According to automotive compliance experts, they tell me that if federal regulations do start to lapse a little bit or we do see any deregulation, state regulators will likely step up and fill this void.
I’m sure I’ll have a lot more information on that and what it entails in the coming months and I will be sure to share that with everybody as soon as I can before I pass the MIC. I also wanted to highlight some top themes this year when it. Comes to the EV market. Obviously, federal tax incentives and the subsequent high lease penetration, which doesn’t exactly roll off the tongue, but is certainly the main theme of 2024. Will that continue in 2025? We, you know, we don’t know quite yet, but this year was certainly in many ways a good year for EVs. That’s evident in recent sales numbers that we’ve seen that have shown double digit increases in EV sales pretty much across every major OEM. It’s also evident in the increase that we’ve seen. In EV market share, again I the leasing was certainly a big driver of this and the federal tax incentives definitely contribute to that. We do know that federal and tax incentives could be going away. We aren’t sure quite yet. And what that may mean is kind of in flux, but certainly for 2024 leasing, leasing, leasing when it comes to EVs. With that said, Ashley, you know what set out to you in the past year. Ashley Savage 3:41 Thanks James. Much like on the auto side, as James highlighted, there’s a lot of uncertainty. For what 2025 will bring for the powersports side. But in talking to lenders and dealers, I’m hearing that people seem relatively optimistic about 2025, which is really all you can hope for after this year. On the retail side, we’ve seen the BMO Capital market. Notes which show us that sales have been down in nearly every month this year due to lingering consumer hesitancy and challenges with affordability. Most recently, and we covered this last week. But sales on average were down 5.4% year over year in November as industry players continue to grapple with floorplan costs quote out of whack debt to income ratios, elevated inventory levels and financing challenges. NP as Tony Altieri put it. Well, last week and saying the broader powersports market needs a meaningful change in finance and that there has to be some significant change to the way financing is working today with interest rates and a number of other things to help dealers with inventory costs and help consumers afford. These payments. I did add that the financing aspect can’t be the blame for all of the market headwinds that we’ve seen similarly to auto, but that it is a huge leg that’s been kicked out from underneath the chair. That being said, it does seem like there’s a dimly lit light. At the end of the tunnel for some of these lenders, dealers and Oem’s in the coming year and we’ve actually seen several of these industry players start gearing up for that demand by investing in new tech and updating their buyer program, whether it’s octane’s launch of. Ride now finance with ride now powersports. Or it’s Harley-Davidson financial. Services decision to add certified pre owned and used motorcycles to its Flex financing program.
One thing is clear and it’s that changes are being made and that there’s a desire to constantly improve and I know we plan to keep it pulse on just how lenders and dealers choose to do so in 2025, as Altieri shared in our coverage from last. Week at the very least, the spring tax season should be a bright spot on the retail side. But it won’t totally eliminate some of the big picture concerns.
But that’s all I have for today. Make sure to keep an eye out for the last few power sport pieces of 2024. Amanda, I’ll hand it back to you for some other key updates from the past week. Amanda Harris 5:46 Perfect. Thank you, Ashley and James. Lots of good stuff happened. Very interesting things happened this past year. So you can check out all of our coverage of course, and we’ll be doing the same into the next year. But you want to give a couple other quick highlights. So, first in economic news, US wholesale inflation did rise in November. The producer Price index went up .4% month over month, driven in part by a surge in egg prices, while other categories showed a slight increase in services prices. Little change in automotive finance access. Auto Finance sold its remaining assets for $78 million after announcing an agreement with Fionic Canada. Excuse me to purchase the business bank pullback in asset based lending has spur growth for lenders who provide floorplan financing for independent dealers. While banks are expected to further tighten credit access in 2025 as demand weakens. So floorplan providers, first business, bank and next year capital. Have seen a boost in their portfolios as dealers utilize more of their floor plan lines of credit for inventory.
And banks scale back and asset back lending, including an auto first business portfolios of about 40% year over year and next gears up about 15% year over year, a higher percentage of banks are projected to tighten credit further in early 2025 as consumer demand. For auto financing is expected to weakened. We do have a new forecast that we have published and it uses data from the Federal Reserve Bank of St. Louis, it’s updated monthly to reflect projections on credit demand and availability.
So you can check that out, kind of see where things are headed. At least in our view, and some exciting news, we are happy to announce that Marcela Brutti, President and Chief executive at Hyundai Capital America, has been named the 2024 Auto Finance executive of the Year. The captains portfolio grew this year as a top leader focused on the three tenants of growth, diversification and innovation. And you can read more in our full executive of the year feature published now there’s some highlights from the past week and that about do it for today’s episode. And for 2024, so thank you for joining us on the road map. Here to follow us on X and LinkedIn and we will see you online autofinancenews.net and here next time.