Specialist
Former executive at Maryann Keller & Associates LLC
Agenda
- US auto lenders’ operating environment, noting pricing dynamics and supply-demand imbalance
- Macroeconomic environment’s implications for loan growth and credit quality, including scenario analysis around a potential recession
- Potential levers for meeting growth targets while managing operating costs
- Competitive landscape and EV outlook and implications
Questions
1.
What is your overview of the current operating environment for auto financers? What 2-3 key trends or drivers should we monitor?
2.
We’ve seen significantly increased prices in the used and new car segments given the supply-demand mismatch. What is your outlook for used and new auto prices and what assumptions are behind that?
3.
Could you contextualise the supply-demand mismatch on the commercial end? Does that differ at all from the consumer end?
4.
To what extent are inflated energy prices impacting auto demand? Presumably it is impacting demand for SUVs or the more gas-heavy-type vehicles. Is there anything to note?
5.
Can you elaborate on the EV trend and how it impacts the financing sector? There are many state-specific mandates around EV production and usage, but is there anything in terms of subsidies on financing options for these vehicles? What could see the demand transition farther towards the EV space?
6.
Do you anticipate the base value curve for EVs to differ from ICE [internal combustion engine] cars, meaning the depreciation on an EV asset would be more substantial or rapid?
7.
How should we think about loan application volumes over the next 1-3 years given the trends we’ve discussed? What could be limiting factors or catalysts to additional loan growth?
8.
Could you opine on the difference in economics in the lease-buyout vs direct-financing type offerings? How does that impact the lender’s residual revenue or margin profile of the loan?
9.
What do you see as the most likely outcomes in the next year, given the timing of so many people coming off leases, but also assuming a recessionary environment? What scenarios do you see?
10.
How do you expect lenders themselves to react in terms of adjusting loan structures or providing additional incentives?
11.
Can the broader adoption for digital platforms for new and used car purchases impact dynamics at all on the lender side?
12.
Would you expect a more substantial drawback from either the consumer or commercial side in a recession? If businesses are trying to right-size headcount or the administrative and labour expense, but at the same time, the affordability is also hitting the consumer side – what is the potential impact of that on both ends?
13.
How does the current credit cycle differ from historical cycles? What does that mean for industry participants in terms of sustaining performance?
14.
What’s your assessment of the general competitive landscape for the auto-financing sector and the relative positioning of certain groups, whether large banks, OEM captives, credit unions, local lenders and so on?
15.
What pricing competition are you seeing from lenders on the used car side, given the rising interest rate environment? Is any particular company or group of players being more aggressive in trying to gain share?
16.
Do you anticipate any lenders making a stronger play in the EV space given it seems that would be an opportunity?
17.
Can you elaborate on your comments about certain players with closer relationships to dealerships being better-positioned in the current operating environment? What does that mean in practice? How does that amplify their competitive positioning?
18.
Is there any way to think about certain players that would exhibit outsized risk in a recessionary environment? Presumably it would be in the less-than-prime category. Of that group, who is worst-positioned given today’s macro environment?
19.
How might a reversion or correction in used car prices in the near-to-mid-term impact players such as Ally Financial or Carvana, especially on their business models?
20.
Considering today’s operating environment and the dynamics we’ve discussed, which players have the most potential for outsized market share gains or losses over the next 1-3-5 years? What are your assumptions in this field?
21.
Is there anything else to highlight about the broader market narrative around auto financing?
