2024 Auto Trends: Financing, Sales, and Consumer Behavior

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You are listening to leaders in lending
from Upstart, a podcast dedicated to helping

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consumer lenders grow their programs and improve
their product offerings. Each week, here,

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decision makers in the finance industry offer
insights into the future of the lending

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industry, best practices around digital transformation, and more. Let's get into the

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show, all right, Welcome everyone. This is Matt Snow live from the

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CBA conference here in DC with Mark
and Melenda. Thank you both for joining

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me. When we take a minute
and introduce yourself, tell everyone where you

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are today. You've been about your
role and how you got to it.

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Sure, so, Melnda Szabritski and
with experience automotive and have been for twenty

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years. I do a lot of
product development, product positioning, but probably

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the biggest role that I have is
I host a quarterly industry presentation, say

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in the automotive finance market, talking
about the trends occurring in auto finance.

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Great, I know that's something we
look forward to and I'm started as well

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to really in depth great look at
the industry. So appreciate you doing that.

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Mark, Mark Brkman a general manager
at USA Financial Savings Bank and so

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I run consumer lending. So that's
basically all our lending proc with exception of

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real estate and credit cards. So
I think auto lending, unsecured personal loans

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marine RV been there about four years, but in the industry over thirty plus

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years previous that was with P and
C Bank and Truest Bank. So but

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out of finance my whole career and
a returning podcast guest, early early guests

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with Jef during the pandemic. Oh
right, so it's going to be doing

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this in person then exactly. And
I know you know. One of Jeff's

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things was to ask a few questions
at the end, and one was to

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ask for a bold prediction. I
don't know if you remember yours. I

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went back to your your episode today. Remember what did I say? So

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your your bold prediction was that banks
would still be around. And I know

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you know between now and then there
we've had some banks failed, but it

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seems like they're still around. You
stick with that prediction, Yeah, I

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do. I think thanks generally are
healthy. I think everybody's going to the

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stress test again now. But I
think you'll see with the new Cecil rules

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out there, with the way you
have to reserve for loan losses and take

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care of those those ups and downs
you see because of the industry or just

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because of what's going on with the
economy. I think banks are much stronger

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position now underrunning standards because I've been
consumer credit. I think are much stronger,

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especially in real estate, and I've
done real estate underrunning before. I

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don't do that here, you'll say, but I think the qualify for loans

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now there's the kind of the asset
test I think is much better in colouteral

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values. So I mean, I
think we're cloutteral values were generally pretty strong.

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Yeah, yeah, so much stronger
from a credit perspective. How about

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deposits, I know, you know, getting deposits now is a pretty hot

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topic. I feel like that's not
my forte deposits, but just being adjacent

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to it with my peer. I
think banks are still pretty flush with deposits.

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I think the pandemic added to that, with everybody and their balance sheets

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got strong because of all the stimulus, or didn't have to make your mortgage

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payment, you're student loan payment.
But I think the industry in general is

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starting to see draw down and their
savings. Another checking accounts, we just

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don't have that. I think mainly
because it's going towards inflationary type. On

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is just trying to keep the lifestyle
that they have out there, whether it's

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travel, whether it's just food on
the table. We're seeing, we're seeing

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the industry in general seeing a flight
from deposits. Yeah, and I know

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we'll dig into that much more with
Melina. Maybe you can give us a

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thirty thousand foot view of the state
and industry. You had a really good

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session earlier today. What are some
of the trends that have stuck out to

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you? So there's of course,
affordability still remains, you know, top

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of mind for most of the industry. Availability is getting better. You know,

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originations a bit, we're a little
suppressed. But what's been nice to

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see is over the past six months
or so six eight months, is the

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growth and loan amounts to slowed down. You know, average new loan amounts

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been hovering around forty thousand. Used
has come down a bit as well,

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still high, but of course the
raising interest rates still continue to push those

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payments even higher. And then with
those rates and now incentives coming back,

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there's been a lot of shifting and
share as far as you know who's who's

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doing the originating. I mean,
captives started coming out of blood incentives towards

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the end of last year, and
that shifted a lot of share back towards

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the captive way. Yeah, I
was really surprised with that. I mean,

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the market moving primer in general,
but captives more incentives. Is the

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rising price of cars helping them do
that? Or how was that value coming

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in? Really tied into the fact
that there was inventory, you know,

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without in any inventory, we really
saw no incentives. That was, of

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course the same time that the rates
were going up. Credit unions being slow

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to raise their rates, really took
on share became the largest lending segment,

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especially unused But with day's supply coming
back, inventory back, we did start

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to see the incentives back in the
industry and that really just pushed the captives

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share. Gotcha, And I know
you had a stat mark you mentioned you

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talked about like inflation and the cost
going up not only for vehicles, but

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the total cost of ownership with the
vehicle really adding burden to the consolatory.

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Today, just in CPI, we
came out of auto insurance across industry,

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the share of the last years up
twenty percent. It was just a little

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bit north until twenty point five.
I saw. So when you look at

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the consumer of the average car payment
with interest rates being a we just looked

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at average the number one car finances, the F one fifty, and so

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that's pretty much all banks for finances. But you look at the average cost

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of last year versus day with interest
rates going up, cost to insure and

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gas, it's almost two y forty
dollars a month difference between this time last

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year. It's huge. It's it's
I think what Linda talked about it,

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that's what's impacting. I think affordability
in general. I think that's also why

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the captives are out there subventing.
I think if they did, if their

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cars weren't selling themselves like they were
in the pandemic, I don't think they

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would do that. I think at
interest rates were normal, they probably wouldn't

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have to do it either. Yeah, and I think that. I think

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the last time I looked at the
F one fifty, I think the average

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loan payment was around twelve hundred dollars. That's insane. I remember, like

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you think a truck in and out
like forty thousand dollars f one fifty you're

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talking minimum seventy yeah, I mean
yeah, so our consumers making different choices

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given that burden. Are they choosing
lower models? Are they changing the way

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they financed these cars? You know, it's it's funny because I've been doing

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this for a long time and people
would always ask, like, what's the

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consumer stress or will we see consumers
that they start getting stressed going back into

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cars and like away from the big
trucks in the SUVs. And that's just

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not the case. You know,
We're we're still, like I said,

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f one fifty CRV the SUVs.
It's it's sixty over sixty percent of what

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we finance are SUVs and cuvs,
and they have price points higher than cars.

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Of course, we're also not making
as many cars, but we're not

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seeing consumers, you know, shy
away from those vehicles. You know,

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leasing's coming back, so that's helping
because that's bringing a lower payment. But

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consumer behavior hasn't changed. The most
interesting shift in consumer behavior that I've seen

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in the data is with the raising
interest rates is cash. We've seen a

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lot more cash come into the market. You know, we used to do

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about fifteen percent cash. We're now
over twenty for new used as like over

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seventy percent cash or a little over
sixty percent cash, so a lot more

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cash. Yeah, So was that
fuel do you think by the stimulus or

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what now? It was after that? It was it was really tight hand

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in hand with the raising interest rates. Okay, And if the captors weren't

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running incentives, if you did have
that zero percent or one to nine.

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And I asked you a question in
the seminar today, but basic last is

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is it home equity when they come
up to the table, and it's not.

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It's cash, it's real cash for
people have that. I understand bright

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the chuck and go off the line
as they get the text ductibility and I

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could do it over maybe twenty years. You know, Yeah, they get

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that payment down, but I said
the true cash which you can which is

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kind of surprised me. But I
think that affordabilities is the biggestue. I

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think I looked at their going longer
terms, but I do think some of

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the consumers out there just sit on
the sidelines. I think that's why you

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see the sub bench out there.
Car dealers are coming off the price that

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they were MSRP only. So I
think there's start to see them come off

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the price before and so. But
I think it's just over affordability. You

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said sixteen percent over one thousand dollars. I was like, yeah, my

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first house payment maybe thousand dollars,
but I can't even imagine a thousand dollars

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car payment. And it's on the
lower credits scores, is what you told

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me. It's well for new I
mean, new car buying is always going

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to be very prime. But it's
still a prime score, but it's one

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of the lower scores compared to like
the six hundred payments of the you know,

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four hundred dollars payments, but yeah, it was one of the lower

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and even on the U side four
and a half percent over one thousand.

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Yeah, and they're they're those big
trucks. Well, I think it's it's

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I saw a statue for the banking
I don't not include the capsus, just

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banks and prime lenders out there.
Thirty percent of the market is terms greater

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than seventy two months thirty percent and
so, but the average liquiment, I

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mean, the average term is still
sixty eight on average, And what's your

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book on that on average? But
thirty percent I was shocked at that number.

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Two that's across the industry. So
I think consumers are just choosing those

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longer those longer terms to get the
payment, just to get the pay out

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out there. So other than extending
term to get the payment down, are

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there other things you're seeing in terms
of how people are financing these cars or

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innovations in the automotive, the dealer, the lendings based this is pretty playing

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vanilla lending. I just I think
we're seeing longer terms. There's nothing exotic

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out there. I mean, acts
just do balloon lending a long time ago

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to kind of keep up with the
leasing. I just don't I think for

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auto lees to stick to the tribes, I've not seen anything innovative out there.

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And the consumer I think we're seeing
put more money down. You just

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try to get that payment down as
well. And then people along the sidelines

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I think too as well. So
you can't create demand, you just can't.

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Well, I think we also one
thing that really helped from a consumer

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standpoint was even though inventory was scarce, it drove up used values and that

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led to the past couple of years
consumers having a lot more equity in their

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vehicle. I mean you could look
at the top, like the top ten

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most commonly purchased used vehicles and the
trade in values or even just that the

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retail value on those cars were higher
than the original MSRP from when they were

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bought two or three years ago.
So that really helped. And so that's

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it's been beneficial fort thanks but also
beneficial for consumers and bringing those loan to

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values down quite a bit on us. Now we're still kind of seeing the

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opposite of that. On the new
vehicle side, it's getting better, but

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with the inventory scarcities and things selling
well over MSRP, we saw those loan

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to values just really skyrockets. So
we're kind of recovering from that, but

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it's still looking really good for the
used market. And I'll give you my

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personal experiences. So my daughter went
to school in DC. Her car got

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stolen Shesing crad school. So that's
what I had to pay MSRPN. Never

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paid MSRP in my life. So
two years ago, go to the car

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dealer and there was like, hey, we got three we got three subers

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coming in meat or they're going to
be gone. So I had that.

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We let the truck pulled up.
Cars got off. So her car got

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stolen, they recovered. The crowds
like, oh car, I did the

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post found it and it was it
was a totyter rep for we paid twenty

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one thousand dollars for she went to
school, and I think I'm going to

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get it was a total loss claim. Okay, I said, I'm going

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to get The value I got was
fifteen thousand dollars and the car is five

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years old, and I was like
twenty I paid twenty one for it.

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So then I had the other shock
I had was like going to the car,

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You're like, while we're waiting for
the Semi Darted to pull up with

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the cars, were looking at used
cars and the price of the same car

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was more expensive on the new car. I was shocked. Yeah, yeah,

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definitely, those values were really surprising. I'm not the only one that

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during you know, twenty twenty one
made money selling a car, which is

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that doesn't happen now. The cases
of people, especially with trucks, saying

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you know, hey I made fifteen
thousand on this truck. You know,

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it's just it was crazy. But
yeah, so those those days are gone.

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Yeah, I was just so where
do you see that end? Like

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or are we in a new normal
or what where's the industry go from here?

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Yeah, I mean, well,
values are still a little inflated,

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and I don't expect that to third. They're down, they're still yeah,

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they're still high. I don't expect
that really to change because when you do

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look at the used car market,
you know, so much of the used

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car market is content and upon off
lease vehicles. You know, that constant

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supply of late model used vehicles coming
back. And we're still doing strong on

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the returns from three years ago when
we were leasing over thirty percent, But

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keep in mind we've had you know, a year and a half rereleasing was

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under twenty So in the future,
starting towards the end of this year and

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really into twenty twenty five, we're
going to be down over a million units

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of off lease vehicles that we were
used to So I think we've got the

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potential for that to impact values in
the future. The off lease is still

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doing well right now, but it's
the reduction's coming. Interesting. Do you

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see have you seen any changes to
underwriting in terms of you said, like

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the landing side usually have tried and
true. Yeah, I will say this,

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I said for the indirect lenders out
there, not for the direct lenders.

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In general, the industry, we've
seen it typening in both pricing and

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also in credit policy, especially when
you come into a recession. You're going

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to see that. When your directly, that's a little bit differ because it's

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a known customer, it's a known
member for USA, you know them,

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and they probably have another product service
with you. But when I'm buying paper

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from a car dealers, it's a
brokeren loan, So there's some risk.

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You carry higher risk because of that, because they don't see you as their

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primary bank and the consumer that gets
the car. So there's a little bit

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more risk in this. But I
think the indirect letters and the large lenders

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have tightened up their bybox. I
don't think there's been wholesale changes, but

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they think they've tightened it up,
and then they've also priced up to take

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on because they're looking for more risk
down the road and losses or with the

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economy now, I think we're coming
to a soft landing. I don't know

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what you want to call it.
Economy. Yeah, Rice, it is

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weird, So I do think you'll
see it again. It will open back

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up. I think again too when
it does, I don't know yet what

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are you saying, because you have
access to again to a lot of data

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and experience in terms of trends,
what are other lenders doing? You see

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pockets of that loosening up. Yeah, so I don't see it loosening per

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se. You know, credit scores
continue to increase, just overall, sumer

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credit is increasing, more consumers are
prime scores are just rising. But when

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I look very specifically, like if
i'm if I'm looking like the top ten

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banks, you know, almost everybody
your your credit score increases, you know,

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fewer originations and subprime, and it's
a bit of a mix because yes,

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there are fewer subprime consumers out there, but the reduction, especially in

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the bank population, is well well
beyond what just normal increase credit scores.

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So I definitely see the banks tightening
up. Like I said, the loan

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to values for the banks on the
U side, it has been really really

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strong. It's like ninety percent rates
versus you know, well over one hundred.

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So I definitely see trends like that, and I think you know a

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lot of also, you know,
there's been reduction in banks share, but

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so much of that was credit union
driven and you know, captive driven and

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a few banks leaving. It'll be
interesting to see as the market continues to

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rebound and you know, win delinquency
start to come down, which are not

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coming down right now, it'll be
interesting to see if those lenders come back

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to the market. Yeah, so
that was actually going to be my next

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question, are you are you seeing
the delinquency is kind of just returned to

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a normal So we're seeing that spike
right now, but it's just kind of

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renormalizing. But for the most part, you know, if you look across

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the various trade types that we're tracking
delinquency, you know, bank, card

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and mortgage and you know, unsecured
lending, et cetera, they're kind of

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returning to you know, pre COVID
levels, which was extremely suppressed. So

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those are sort of returning to more
you know, normal type levels. Auto

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is a little inflated right now.
The auto delinquency numbers that I'm seeing are

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relatively high, Like the percentage of
loans themselves are kind of similar to what

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the peak was in two thousand and
nine. The balances are higher, but

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in part we also have twice the
amount of balances, you know, one

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point four trillion in automotive loan balances. It was half of that in two

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thousand and nine, so of course
it's going to be higher. To ask,

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question, yeah, yeah, right
ahead, question I answer. But

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curious with the FICO scores going up
is just in your experience, maybe the

256
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numbers one should but as delinquencies arising, charge us a rising and revolving balances,

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debt's going up on revolvers right this
one, you think you'll see a

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natural scores come down. You know, it's interesting because the score increase has

259
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been going on for years and years. It's it's not a relatively new phenomena.

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Like I said, it's been like
six points every year since twenty thirteen.

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We didn't see it come down when
the delinquencies declined after two thousand and

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nine, so it's been kind of
continuing to go up. I think the

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rate of acceleration will probably decrease because
you also have to look at that whole

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you know, the aged mix of
the consumer population. And you know,

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people ask, well, how can
scores go up and delinquency increase. It's

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like, well, the delinquency is
increasing in the younger population, which is

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where the lower scores are and you
know your aging population has higher scores.

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Yeah, yeah, so that I
agree with that. I'm curious what you

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think is there's a lot of I
think consumers are more aware of their FCAL

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score. Now they're more aware,
they can go to places and they can

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say, how do I improve my
score? I'm wondering if that's some of

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it too. It is, We've
done a lot of analysis around that,

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because there's of course there's there's aging, but the awareness of consumer credit.

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I think every single credit card I
have, probably USA included, gives me

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the opportunity to see my credit score, every single one. And we did

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a survey recently of consumers asking them
do you know your credit score? And

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universally people were like, yes,
I know my credit score. If they

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didn't know it exactly, they knew
the rough range that their credit was in.

279
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You know, it is an everyday
discussion, which is like when I

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travel and people ask where I work, I'm very hesitant to sometimes saying because

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everyone wants to discuss, you know, credit score, how can I exactly

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vice? But yeah, people are
well aware. It is crazy how that's

283
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changed, even in my lifetime,
from the point where like you would only

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know maybe as you're going in to
apply for credit or if you got the

285
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cartage especially right, Yeah, and
that's the only time you really would know,

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but never before you shop for a
car. Now. And so we're

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seeing consumers in general, not not
just artment but they're like general population out

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there. But they're going to say
how much what's my score because I know

289
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it's tied to my rate? What
can I do? Then? And then

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you see and there's some aggregators out
there that are and that they're not banks,

291
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but there you go there and they'll
help you figure out what you can

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do get your score to get a
better price. Or I have a loan

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it's at this rate. Now,
I had to get a high rate because

294
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my credit score was good. What
can I do? When can I rEFInd

295
00:18:37.680 --> 00:18:41.039
to get them down? So I
can rEFInd my rate down. So there's

296
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a lot of accuracy that just they
didn't exist before. Yeah. Well,

297
00:18:42.759 --> 00:18:47.359
they like experience boost, you know, booster, use alternative data boost your

298
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credit scores, a lot more consumer
education. Yeah, exactly, I want

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to go back maybe a little bit. Mark. I think you have,

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especially with the member based at the
USA, a lot more connection to uh,

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you know, their their story and
how they interact with the banking world.

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Are you hearing from them as delinquencies
are going up? Like why you

303
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know, because we're seeing primer consumers
and delinquencies going up. Are there different

304
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reasons? Are they they calling in
looking for helpers, insights? And pretty

305
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much what my coal experiences. Maybe
it's just there's some type of a hardship

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going on, you know, loss
of the job, but it's still very

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good. So it's it's like you
had dual income coming in and then one

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lost their job or it's between jobs, and so it's a short term kind

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of event. But there's nothing I
think out of just like there's any new

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things that we're seeing out there.
I think in the industry now, that's

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just it's just a regular thing.
It's just normal. I think it's again

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affordability. Everything's expensive, yeah,
and so I just everything's more expensive now,

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and I think that's what's also leading
to us seeing delinquency occur in segments

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that traditionally don't account for the majority
of delinquency. You know, your lowest

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credit scoring consumers will of course represent
the majority of delinquency scores work, but

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we're increasingly seeing them near prime consumer
and we're talking like a you know,

317
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consumer scores and are six hundred to
six sixty. You know, that's kind

318
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of middle of the road. They're
increasingly representing more of what's going to linkuent

319
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and that really started with COVID.
Like you would see you know, near

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prime be five percent of you know, delinquency accounts and now it's like twelve.

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So that's that's I think where we're
starting to see that. And you're

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starting to see these consumers also use
more alternative finance and or you know,

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like you know, short term loans
and hitting you know online kind of those

324
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those online loan brokers and such,
and you would know more than I.

325
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I read a stat was that comes
Wall Street Journal that was like sixty percent

326
00:20:40.039 --> 00:20:44.000
of consumers or paycheck to paycheck.
Yeah, and if that's the case,

327
00:20:44.160 --> 00:20:48.119
and with inflation up, one paycheck
missed, I mean that's that's a big

328
00:20:48.160 --> 00:20:49.960
deal. Yeah. No, we
see lots of stats like that. Do

329
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I think I've seen that same one
or the average household can absorb you know,

330
00:20:53.279 --> 00:20:56.119
maybe a three to four hundred dollars
or something emergency, you know,

331
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they have to fix something ac goes
out. I mean that's that's a big

332
00:21:00.240 --> 00:21:03.119
event. Right. You can't delay
put off the AC to live in Texas

333
00:21:03.119 --> 00:21:04.599
in the summer, right, you
can't do it. Yeah, And you

334
00:21:04.640 --> 00:21:07.039
can't miss a car payment because you
need your car to get at the job

335
00:21:07.079 --> 00:21:11.240
and you probably have your job.
Right. But but I but that's some

336
00:21:11.359 --> 00:21:14.200
life event because things. I mean, just look at the cost of repair

337
00:21:14.200 --> 00:21:17.279
a car, cost to fix your
home. I mean, I got I

338
00:21:17.359 --> 00:21:21.359
replaced my AC is like it was
almost three x pre COVID. I mean,

339
00:21:21.400 --> 00:21:23.920
it's crazy come home from business trip
and you're fully stopped, refrigerator stopped

340
00:21:23.920 --> 00:21:30.640
working. Yeah. Life is full
of them. So you know, we're

341
00:21:30.839 --> 00:21:33.400
day one maybe more. If you're
involved in the CBA into the conference,

342
00:21:33.400 --> 00:21:36.920
what have you guys picked up so
far? If you attended other sessions,

343
00:21:36.960 --> 00:21:40.240
anything that you're learning. Yeah,
I've mostly focused on the AUTO sessions.

344
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You know, went to the EV
session before ours and then I honestly,

345
00:21:42.680 --> 00:21:48.519
I've had meetings. It's been catching
up and just kind of getting work.

346
00:21:48.599 --> 00:21:49.799
I've been on the AUTO too as
well, but I haven't had a chance

347
00:21:49.839 --> 00:21:52.759
to go to that one thing.
I just thought just the CBA, that's

348
00:21:52.799 --> 00:21:55.720
what this is one of the best
events out there, I mean, no

349
00:21:56.119 --> 00:21:57.920
doubt. I think the other thing
is is that the energy here. I

350
00:21:57.920 --> 00:22:02.359
think you all, like the folks
here that are in the exhibit all,

351
00:22:02.680 --> 00:22:04.519
I think energy is up. And
it's a tough year. I mean,

352
00:22:06.640 --> 00:22:07.880
but the energy is still up,
which is good. And for me,

353
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it just it just more confirms on
we're not the only one. I mean,

354
00:22:11.680 --> 00:22:15.319
it's it's it's just it's it isn't
and so it's like it's like we're

355
00:22:15.359 --> 00:22:18.960
experiencing everybody's experiencing the same thing.
So I think it's just it's a whole

356
00:22:18.319 --> 00:22:22.119
general just like you learned that like
a confirms more confirmation of things. I

357
00:22:22.119 --> 00:22:26.279
don't think anything yet. I still
still we can still with the conference ahead

358
00:22:26.279 --> 00:22:29.839
of us. Nothing new, aha, But some of your stats were all

359
00:22:29.880 --> 00:22:32.799
hot. But other than some of
that, I mean, like big,

360
00:22:32.920 --> 00:22:36.640
like am I missing something? I
didn't think we're missing something big. I

361
00:22:36.640 --> 00:22:42.160
read a stat last year that auto
fraud finance fraud outpaced card and deposit fraud.

362
00:22:44.359 --> 00:22:47.079
That was that was a I saw
that the industry stat, and so

363
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I'm seeing a lot of people talking
about fraud here at that that it was

364
00:22:49.519 --> 00:22:52.839
always talked about. But I think
because in auto lending. I'm hearing more

365
00:22:52.839 --> 00:22:56.920
of the auto lenders out there talking
about frauds. I think it's been increasing,

366
00:22:56.960 --> 00:22:59.960
so I think all those things.
AI is probably behind on the fraud's

367
00:23:00.200 --> 00:23:02.720
side right to do those type of
things, but I think that's one thing

368
00:23:02.759 --> 00:23:04.000
I have. I haven't yet to
go to that, so but I'm hearing

369
00:23:04.039 --> 00:23:08.160
a more interesting attendant of the fraud
sessions. Yeah, focus on I think

370
00:23:08.160 --> 00:23:11.319
with any tool, like, the
bad guys tend to get all of them

371
00:23:11.319 --> 00:23:12.599
before the good guys. So it's
good that we're able to have some of

372
00:23:12.640 --> 00:23:15.200
the I mean the fraud of the
industry. Because there was an expert that

373
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was talking about it at another conference
and the thing that shocking was, it's

374
00:23:21.200 --> 00:23:26.759
not the hacker in the basement,
it's sovereign nation fraud. It's like it's

375
00:23:26.279 --> 00:23:30.799
big yeah, yeah, yeah.
Auto is always a little different because it's

376
00:23:30.799 --> 00:23:33.599
not like credit card where you're worried
about you know, bust out fraud and

377
00:23:33.279 --> 00:23:37.799
sure and all of that. It's
you know that car is I mean that

378
00:23:37.400 --> 00:23:40.920
what didn't make it makes sense you
think about it. But the reason why

379
00:23:40.960 --> 00:23:44.720
the frosts have moved on from credit
card deposits is because it takes I have

380
00:23:44.759 --> 00:23:48.039
to do sixty one thousand dollars do
sixty accounts to take over a thousand dollars

381
00:23:48.119 --> 00:23:52.000
for a credit card. I do
one auto loan, and it's so I

382
00:23:52.039 --> 00:23:56.519
think the severities higher, frequencies less. But if you can get three or

383
00:23:56.519 --> 00:23:59.920
four cars, I mean you're talking, you could be a couple hundre thousand,

384
00:24:00.759 --> 00:24:04.519
you know, as a fraudster.
So you actually have some involvement with

385
00:24:04.519 --> 00:24:07.759
the CBA. I'm sure there's a
reason you really enjoy this conference. Maybe

386
00:24:07.759 --> 00:24:11.960
you can talk a little bit about
it. All the CBA, probably thirty

387
00:24:11.000 --> 00:24:15.240
plus years. I think I would
not be where I'm at in my position

388
00:24:15.319 --> 00:24:18.680
today without the CBA. One is
it's just the relationships you forward. You

389
00:24:18.720 --> 00:24:21.240
come to events like this, you
get to know other lenders. The committees

390
00:24:21.240 --> 00:24:22.519
are very strong, I think the
committees of the health. And then I

391
00:24:22.599 --> 00:24:26.880
think the other piece is I went
to the graduate school banking school. So

392
00:24:26.000 --> 00:24:30.480
what I love about CBA is I
send my teammates to that school because I

393
00:24:30.559 --> 00:24:33.480
learned so much from it. Because
a lot of us, as bankers,

394
00:24:33.480 --> 00:24:37.960
we come up, we're a specialists, and what that school teacher how to

395
00:24:37.000 --> 00:24:41.319
do is teach you how to run
a bank. So when they're talking about

396
00:24:41.359 --> 00:24:44.240
balance sheet and you may be in
lending and you don't know what what deposits

397
00:24:44.240 --> 00:24:47.720
does? You learn what deposit,
you learn how what cecil means? You

398
00:24:47.799 --> 00:24:51.039
learn what makes the bank healthy because
like a lot of us come up,

399
00:24:51.039 --> 00:24:53.279
I'm a collector, I'm an underwriter
and product measum in pricing. You don't

400
00:24:53.279 --> 00:24:56.559
get that. You may get a
little bit exposure across the bank, but

401
00:24:56.559 --> 00:24:59.640
it really gets you horizontally and grows. Just that's the And then what they

402
00:24:59.680 --> 00:25:03.559
do on I think four banks,
the Trade Association, piece of what they

403
00:25:03.559 --> 00:25:06.720
do on Capitol Hill for us and
all what they do to like help with

404
00:25:06.759 --> 00:25:10.240
the legislation that make sure it's crafted
in a way you know that that makes

405
00:25:10.279 --> 00:25:15.240
sense. Yeah, yeah, I
know that those can also be sometimes touchy

406
00:25:15.279 --> 00:25:18.079
subjects. But you know, what
are you guys seeing in terms of,

407
00:25:18.319 --> 00:25:22.039
you know, maybe rate reductions,
changes in legislation, anything you're watching out

408
00:25:22.079 --> 00:25:26.279
for. Definitely waiting for rates to
come down is not going to happening time

409
00:25:26.359 --> 00:25:33.160
soon. I think to me,
the one of the hot topics is really

410
00:25:33.200 --> 00:25:36.240
tied more to the election as far
as what direction it's going to go in

411
00:25:36.319 --> 00:25:40.240
the impact that could have on the
electric vehicle market. You know, that's

412
00:25:40.279 --> 00:25:42.079
something that there's a lot of speculation
around. You know, goes one direction,

413
00:25:42.240 --> 00:25:45.839
EV gets pushed, it goes another
direction, and EV is not going

414
00:25:45.880 --> 00:25:49.119
to be pushed. So I think
there's a lot of speculation around that,

415
00:25:49.240 --> 00:25:55.039
and I think that's that's probably the
biggest thing. The FEST signaling three rate

416
00:25:55.279 --> 00:25:57.519
decreases. I think it's probably been
closer to two. Personal opinion. Yeah,

417
00:25:57.759 --> 00:26:00.440
I'm just my experience, but I
think it will come down, but

418
00:26:00.480 --> 00:26:03.359
I think meaningful won't happen till next
year. Sure, and they just try.

419
00:26:03.440 --> 00:26:07.559
They're trying to balance out because employment
is still strong, but it's inflation,

420
00:26:07.640 --> 00:26:10.519
right, They're still to balance it
out. Yeah, So maybe dig

421
00:26:10.559 --> 00:26:12.720
in a little more about the EV, like what what changes do you think

422
00:26:12.759 --> 00:26:17.400
that would have further down market depending
on the well I think the like I

423
00:26:17.400 --> 00:26:19.160
mean, Toyota has already come out
and talked about you know, their pushed

424
00:26:19.240 --> 00:26:22.359
more towards just pure hybrid and more
the hybrid plugins, and I think that's

425
00:26:22.400 --> 00:26:26.119
probably more the direction. I think
we'll start to see, you know,

426
00:26:26.240 --> 00:26:30.279
less emphasis on EV and also,
you know, will there be the the

427
00:26:30.519 --> 00:26:33.839
you know, the infrastructure, you
know, the dollars spent on the infrastructure

428
00:26:33.880 --> 00:26:38.119
to truly support where you know thirty
forty percent EV rates are supposed to be,

429
00:26:40.240 --> 00:26:41.880
and of course what you know for
me, I look at the EV

430
00:26:42.039 --> 00:26:48.279
market. I'm a little mixed on
the EV market in part because I think,

431
00:26:48.359 --> 00:26:52.519
yes, you know, increased fuel
economy always extremely beneficial, but you

432
00:26:52.599 --> 00:26:56.039
also have to consider, you know, today's new car becomes tomorrow's used car,

433
00:26:56.559 --> 00:27:00.440
and your subprime borrower is looking for
cars and looking for forty ability.

434
00:27:00.480 --> 00:27:03.839
And yes, more inventory, prices
will come down, but you're still looking

435
00:27:03.839 --> 00:27:07.119
at a vehicle that is going to
cost more, at least initially upfront.

436
00:27:07.599 --> 00:27:11.359
So you know, we've got a
large still prime population out there. What

437
00:27:11.400 --> 00:27:14.279
are they going to be buying?
I think it calates two with gas prices,

438
00:27:14.359 --> 00:27:15.440
right, So I mean you do
the math how much more I pay

439
00:27:15.480 --> 00:27:19.720
on that versus of gases you know, moderate not way after you're paying European

440
00:27:19.799 --> 00:27:22.920
rights. That's a different story,
right, But I think you do the

441
00:27:22.920 --> 00:27:25.680
math, and it takes a while
to get paid back. And I think

442
00:27:25.680 --> 00:27:27.599
it cold off of the two is
saying the same fear as it was it

443
00:27:27.640 --> 00:27:30.359
was. There are a lot of
incentives out there to do it. But

444
00:27:30.400 --> 00:27:33.359
I think also too, is that
it's that fear how long is that going

445
00:27:33.400 --> 00:27:36.440
to go? The charges are pain
in the rear. I mean it's like

446
00:27:36.519 --> 00:27:38.160
that's and those are legitim it's just
your commuter car, but to be your

447
00:27:38.200 --> 00:27:41.400
primary car. Most people, I
know, if it's their prima, they're

448
00:27:41.440 --> 00:27:44.759
just going back and forth to work. Maybe the Gros story, but not

449
00:27:44.880 --> 00:27:48.319
like because you know a long distance
trip, you're going to think about it.

450
00:27:48.359 --> 00:27:49.039
I mean if people do it,
and people do it, but I

451
00:27:49.119 --> 00:27:53.240
think for consumers as a whole to
embrace it, there's still some things that

452
00:27:53.240 --> 00:27:56.799
are holding them back. But the
thing I remember was like okase, when

453
00:27:57.000 --> 00:28:00.720
the United States went from horse and
buggy todmobile. The government didn't force them

454
00:28:00.759 --> 00:28:04.640
to go, right, I mean, it had to make economical sense.

455
00:28:04.680 --> 00:28:07.960
It was a better product. I
get there faster, it was. You

456
00:28:07.960 --> 00:28:11.079
know, whatever the cost of maintaining
whatever those things were is what drove that

457
00:28:11.119 --> 00:28:15.240
consumer to them adopt you know,
the horse and buggy. I think it's

458
00:28:15.240 --> 00:28:18.160
the same thing here. Yeah,
I mean we were running some numbers on

459
00:28:18.160 --> 00:28:18.920
it. If you think about it, you know there's two hundred and eighty

460
00:28:18.920 --> 00:28:22.960
eight million vehicles on the road.
Light light duty, not even including medium

461
00:28:23.000 --> 00:28:27.359
heavy. Yeah, and just in
the US, and it's only about one

462
00:28:27.799 --> 00:28:33.599
one point seven eight percent of households
have an electric vehicle and one point five

463
00:28:33.880 --> 00:28:37.799
have an electric vehicle and another fuel
type. So to the point of it's

464
00:28:37.839 --> 00:28:41.359
it's not necessarily the true hybrid of
that, the true plug in hybrid,

465
00:28:41.759 --> 00:28:44.160
but they're expensive and there's not that
many out there. Like when you wanted

466
00:28:44.200 --> 00:28:45.880
to get that electric car EV years
ago, it was just that you had.

467
00:28:45.880 --> 00:28:48.200
You had the Prius, but it
was spartan. It's like now then

468
00:28:48.240 --> 00:28:51.799
the other ones came out there,
they're more luxury now and everything else.

469
00:28:52.039 --> 00:28:55.799
But I do think the true the
true plug in hybrid, I think I

470
00:28:55.839 --> 00:28:59.240
think I think that's where I think
this might go. There first, i'd

471
00:28:59.240 --> 00:29:02.680
even up better adopt there. But
the prices are expensive too there, and

472
00:29:02.720 --> 00:29:04.079
you're right, there's not as there's
not that many of them. Yeah.

473
00:29:04.559 --> 00:29:10.160
So those there's mine and there's like
very few. Yeah, those don't seem

474
00:29:10.200 --> 00:29:11.680
to relieve some of the pressures we
were talking about earlier. On the consumer

475
00:29:11.759 --> 00:29:15.000
there's one two electric that are true
hybrid. They don't have the distance of

476
00:29:15.079 --> 00:29:19.640
a true EV. So it's like
that maybe I've seen sixty miles at most,

477
00:29:19.880 --> 00:29:23.960
and my memories could be wrong,
but I think it's not like three

478
00:29:25.079 --> 00:29:26.839
hundred miles and get with the tests
or whatever else. So I think that's

479
00:29:27.000 --> 00:29:30.599
but the true hybrid if they get
longer distance and you had that gash,

480
00:29:30.599 --> 00:29:33.559
you have to worry about that from
going across the country going long distance that

481
00:29:33.640 --> 00:29:37.079
we're about charging. Yeah, And
I don't remember the numbers, but I

482
00:29:37.079 --> 00:29:41.720
saw somebody presented at another conference recently. They were showing I think it was

483
00:29:41.759 --> 00:29:44.839
Cox. They were showing the number
of the percentages, like the percentages of

484
00:29:44.839 --> 00:29:48.680
households that actually have a garage,
so like if you are doing home charging,

485
00:29:48.400 --> 00:29:51.920
are you do you have a driveway, do you have a garage?

486
00:29:51.920 --> 00:29:53.880
Do you have a place to park
to actually charge your vehicle? And I

487
00:29:53.960 --> 00:29:57.039
was surprised at some of the very
low figures, and I just look at

488
00:29:57.039 --> 00:30:00.839
my neighborhood. Of course, I
also in a snow so yeah, you

489
00:30:00.839 --> 00:30:04.279
know Colorado, ice know, et
cetera. But I look at the fact

490
00:30:04.359 --> 00:30:07.559
up, I think I am the
only person in my entire neighborhood that parks

491
00:30:07.599 --> 00:30:11.480
their car in the garage. Everyone
else at storage. But my house is

492
00:30:11.480 --> 00:30:15.359
also one hundred and twenty years old. I can't accommodate an electric vehicle.

493
00:30:15.480 --> 00:30:18.400
I can't charge it. They're cool. I like that. It's just I

494
00:30:18.559 --> 00:30:23.000
just it's meat. I'm sidling bug
now. But I think about it.

495
00:30:23.000 --> 00:30:26.200
But it'd have to be my third
car. Yeah, And you know,

496
00:30:26.240 --> 00:30:30.400
that's just like the other thing I
read. It was I forgot where it

497
00:30:30.440 --> 00:30:32.839
was, but it was about apartment
comp how many how many they're in an

498
00:30:32.799 --> 00:30:37.720
apartment complexes? And then the apartment
complex the large communities, the ones that

499
00:30:37.960 --> 00:30:41.200
like the post homes and stuff like
that, the cost to put a charger

500
00:30:41.240 --> 00:30:45.359
in an apartment complex, and it's
like they're expensive and and and then even

501
00:30:45.400 --> 00:30:48.640
if they charged somebody to charge their
car, the payback was a long time.

502
00:30:48.680 --> 00:30:52.039
So I think there's look, how
many, how many people are in

503
00:30:52.119 --> 00:30:53.960
apartments? Yeah? You think you
got to thick through those things. Yeah.

504
00:30:55.160 --> 00:30:59.240
Is there anything that those OEMs are
doing differently to disrupt the buying process

505
00:30:59.240 --> 00:31:03.079
to financing experience with the consumer the
Yeah, nothing that I've really seen,

506
00:31:03.119 --> 00:31:07.240
I think, you know, outside
of the captive I still hear some lenders

507
00:31:07.279 --> 00:31:11.240
talk about just some uncertainty with financing, you know, EV's I think there's

508
00:31:11.400 --> 00:31:15.400
there's always that speculation around battery fear, which I think is for the most

509
00:31:15.440 --> 00:31:19.880
part unfounded. You know, you
do see instances where you've got lenders who

510
00:31:19.920 --> 00:31:25.839
are doing products where there's an additional
insurance on the battery as part of you

511
00:31:25.880 --> 00:31:27.319
know, as part of the financing. So you do see things like that,

512
00:31:29.279 --> 00:31:32.720
But overall, I don't really see
that much of a difference when it

513
00:31:32.720 --> 00:31:37.519
comes to the EV space versus traditional
I haven't either. I think the thing

514
00:31:37.599 --> 00:31:41.720
I think that the real legit is
is that COSTU and should talk about the

515
00:31:41.720 --> 00:31:47.119
cost insure a f one fifty.
The cost to ensure EV is up there

516
00:31:47.160 --> 00:31:51.039
too. It's higher, it's a
higher preme. That's why TEST offers insurance

517
00:31:51.079 --> 00:31:53.240
because but then you're going to wonder
that's now, but later when they have

518
00:31:53.279 --> 00:31:56.359
loss rates down the road, is
it going to change? I don't.

519
00:31:56.400 --> 00:31:57.880
I don't know. That's that's still
uncertainly out there. But I think that

520
00:31:59.279 --> 00:32:01.200
having to get that insurance in there. So I think what the automakers are

521
00:32:01.200 --> 00:32:05.079
doing nothing that I think the lenders
I've seen out that are doing. Yeah,

522
00:32:05.079 --> 00:32:07.400
I've heard mixed on that where they
are cheaper to maintain, there's fewer

523
00:32:07.480 --> 00:32:12.319
mechanical parts, but in terms of
repair these Well, if you get in

524
00:32:12.359 --> 00:32:15.119
that stamp car, you get in
an accident, you're not just taking off

525
00:32:15.119 --> 00:32:17.319
the bumper, it's the whole front
of the car, right, or it's

526
00:32:17.319 --> 00:32:20.799
the battery on top of it,
right, So it's six more expensive or

527
00:32:20.799 --> 00:32:23.000
repair great. Well, I appreciate
you guys joining me today. Any of

528
00:32:23.039 --> 00:32:29.960
our thoughts you want to leave us
with. I'm just I'm looking for rates

529
00:32:30.000 --> 00:32:34.000
come down, please. I think
that's probably unanimous sentiment at the comments.

530
00:32:34.119 --> 00:32:37.079
But no, I mean it's it's
I'm just seeing a lot of positivity in

531
00:32:37.079 --> 00:32:38.480
the data. And like I said, the loan amounts are stabilizing, We're

532
00:32:38.519 --> 00:32:45.240
still growing, consumers are out there
buying, we're financing. It's still plugging

533
00:32:45.279 --> 00:32:49.200
away. I think for I think
for banks, to think for prime auto

534
00:32:49.279 --> 00:32:52.640
finance lenders been two cycles before in
my career. I think this is gonna

535
00:32:52.640 --> 00:32:57.440
be a tough year. There's more
headwinds. We've talked about it today in

536
00:32:55.359 --> 00:32:59.799
our conference this morning, but I
said more headwinds and tail was But I

537
00:32:59.839 --> 00:33:04.759
do see green shoots for next year
with rates coming down, inflation coming up,

538
00:33:05.119 --> 00:33:07.319
and I think the links will come
down to as well. I think

539
00:33:07.359 --> 00:33:09.039
that as inflation starts to come down. Think things will improve about that,

540
00:33:09.200 --> 00:33:12.400
I do feel, and they'll be
pent up demand. So I think for

541
00:33:12.400 --> 00:33:15.319
those lenders out there, because people
have a love affair with cars, and

542
00:33:15.359 --> 00:33:17.920
I think you'll they're there on the
sidelines double when those things kind of return,

543
00:33:19.000 --> 00:33:22.039
they feel more comfortable. I think. I think for lenders will next

544
00:33:22.079 --> 00:33:23.960
year will be a better year.
Right and Melenda Mark, thank you both

545
00:33:24.000 --> 00:33:28.640
for joining me. Yeah, thank
you. I'll start partners with banks and

546
00:33:28.680 --> 00:33:32.680
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547
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