SAN FRANCISCO — Auto finance is increasing efforts to diversify an industry that is largely dominated by a single demographic.

“The number of meetings I’m in with one female and 10 men that are all middle-aged is very frequent, and that has to continue to change,” Chase Auto Finance Chief Executive Mark O’Donovan said during a panel discussion at the American Financial Services Association’s Vehicle Finance Conference last month.

Chief executives from BMW Financial Services, Chase Auto, and Ford Motor Credit — whose books of business range from $36 billion to $81 billion — noted that missing out on the opportunities a diverse workforce provides is a costly mistake.

“If everyone looks like me, thinks like me, and acts like me — that’s not good,” said Ian Smith, chief executive BMW Financial’s USA & Americas region. “Bringing people from different perspectives is making better business decisions, and recruitment is a key topic.”

BMW Financial, for one, is working to attract the millennial demographic to the auto finance business. “We have to make our business exciting and attractive,” he said. “We can do that by exploring new technologies, looking at robotics, and looking at new ways of thinking.”

Ford Credit’s Chief Executive David McClelland concurred. “Younger people in our more junior positions come up with the most fantastic ideas, and they’re changing the business,” he said.

For lenders to beef up diversity and inclusion plans, they must approach the issue from the top-down and vice versa, O’Donovan said. “It has to start with hiring and coaching,” he said. “But also — we’ve been working on this for a while — we put full-time senior executives on this [diversity] agenda.”

Chase Auto has executives dedicated to developing diverse leaders within the bank’s operations. “One full-time leader is dedicated to advancing leaders of different ethnicities, one person drives the women agenda, and one person drives the military agenda,” O’Donovan said.

As a result, Chase Auto employees are accustomed to diversity and inclusion efforts as a part of its regular operating structure. “It’s starting to get pushed into our business routine, and that’s a key point,” O’Donovan added. “Whether you’re a bank or a captive — you have to build this into your daily routines. That means not being afraid, and being frank and direct with each other.”

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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Doug Timmerman, President of Ally Auto Finance

Ally Financial Inc. hit a “sweet spot” with its auto portfolio last year and is focusing on keeping that consistency throughout 2019, President of Auto Finance Doug Timmerman told Auto Finance News.

The bank grew its auto portfolio 2.1% year over year to $35.4 billion at yearend 2018, as delinquencies increased and charge-offs declined, the company reported in fourth-quarter earnings this week.

“We like our origination flow at the level it is today,” Timmerman said. “For us, the consistency of that growth and our business has been a key.”

As for 2019, the bank expects growth in origination volume to remain flat despite a shift in mix. “We plan for similar origination volume [in 2019], but we may tick up more in the used business,” he said. “When you hit that sweet spot with the portfolio, you want to stay there.”

Meanwhile, delinquencies increased 10 basis points to 3.5% of the company’s auto portfolio, and net charge-offs dropped 26 basis points to 1.4% of the portfolio in the quarter.

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Photographer: Angel Navarrete/Bloomberg

Santander Consumer USA drove up auto originations 59% year over year amid discussions around “optimizing” its current contract with Fiat Chrysler Automobiles Group, SCUSA Chief Executive Scott Powell said during the company’s fourth-quarter earnings call this week.

“We continue to operate under [the] existing contract,” Powell said during the call. “Our discussions with Chrysler are ongoing. I would say they are constructive, and we are talking about a number of things, including optimizing the contract that we have.” 

The subprime lender’s auto originations shot up to $6.9 billion in the fourth quarter, compared with $4.3 billion during the prior-year period. Yearend originations increased 43% to $28.8 billion. 

Loans originated by subsidiary Chrysler Capital shot up 63% year over year to $2.5 billion, while leases increased 64% to $2.1 billion. Meanwhile, Chrysler Capital’s penetration rate grew to 30% in 2018, from 21% in 2017.

Mark DeVries, a senior research analyst at Barclays, asked during the earnings call if the increased Chrysler Capital penetration rate is a sign that optimizing existing contracts with FCA is “more viable today than it might have been about six months ago,” DeVries said.  

Powell’s response: “Yes, I think so. I mean I wouldn’t presume to speak for Chrysler, but I think the progress we’ve made over the last year is pretty significant. They had a really solid sales year, the company is doing really well. And, yes, I think that is part of the discussion.”

One analyst told Auto Finance News that industry trends like lagging new-vehicle sales will likely hamper FCA’s captive plans.

“When sales are at risk for slowing and [interest] rates are rising, it’s crazy to rock the boat and try to implement a new captive,” Jack Micenko, bank and auto finance analyst with Susquehanna Financial Group, said before the earnings call. “Do you really want to start your captive finance arm in this perfect storm environment? I’d say, ‘No way.’”

In May 2018, FCA confirmed in reports that it was considering buying the Chrysler Capital portfolio from Santander Consumer USA to form a U.S. captive finance arm.

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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Auto Finance News is calling on the thought leaders in auto finance to join the speaker roster for the first annual Auto Finance Sales & Marketing Summit, to be held at the Omni San Diego on May 13.

Help shape our agenda for 2019 and beyond by letting us know which speakers you would like to hear. 

To submit a speaker proposal, click here.

All speakers are selected after careful consideration by the Auto Finance News editorial team. Potential speakers will be contacted and confirmed directly by the editorial team. Only qualified submissions will receive a response.

At Auto Finance Sales & Marketing Summit, we will explore topics like measuring sales rep performance, developing a direct lending marketing strategy, technologies to improve marketing efficiencies, and more.

Produced by Auto Finance News and Royal Media, the Auto Finance Sales & Marketing Summit will consist of one-on-one chats with top executives, as well as presentations and panel discussions with industry thought leaders. The full Auto Finance Sales & Marketing Summit agenda can be found here.

To learn more — or to register — for this year’s event, visit the Auto Finance Accelerate homepage here.

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Global Lending Services doubled its origination volume — for the second straight year — to $1.1 billion in 2018, Chief Executive Steve Thibodeau told Auto Finance News. The subprime lender’s origination volume had doubled to $558 million in 2017.

Thibodeau attributed the portfolio growth to the company’s expanding dealership network, which increased 30%, to 8,000 franchised dealers. This time last year, GLS worked with 5,000 dealers.

Part of growing dealer numbers, Thibodeau said, is “dialing in the program and making it better for dealers.” That includes giving dealers more opportunities to sell back-end products, such as warranties, and make more profit per loan with flat fees.

“If I think about how we doubled over the last couple of years, each year it’s twofold,” Thibodeau said. “We get more dealers enrolled. The more dealers that get involved, the more applications we get to see, the more opportunities we get.”

Then, add the opportunity for dealers to make more money on each loan, “so each dealer wants to do an extra deal with you and that kind of feeds on itself,” he added.

GLS also expanded its sales organizations to more than 50 sales representatives from 25 the year prior. Doubling the sales organization has helped the lender add dealership partners, Thibodeau said.

Thibodeau hopes to double GLS’s originations will double again this year. Conservatively, though, he estimated 50% to 60% growth, to $1.5 billion or $1.6 billion. With that, he anticipates growing the number of dealerships to 12,000 over the next 12 to 18 months.

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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Used-car leasing app Fair closed a $50 million debt facility financed by Silicon Valley Bank. The funds will be used to purchase more vehicles for Fair’s fleet, the company announced Jan. 24.

The new debt facility is a move for the bank to support “companies offering disruptive solutions in industries undergoing transformative change,” Zhengyuan Lu, managing director and head of SVB’s warehouse financing group, said in a press release.

Additionally, SVB’s funding contributes to Fair’s strategic move to leverage a “partnership model” to enable global expansion, said Fair Chief Executive and Co-Founder Scott Painter.

“SVB is providing an innovative and flexible debt facility that supports our specific business model,” Painter said in a press release. “Their forward-thinking approach is enabling companies like Fair to achieve scalable growth in the innovation economy and is a true blueprint for how tech companies should be able to access debt.”

The financing comes on the heels of a $385 million Series B funding led by SoftBank, which Fair is leveraging for a “major credit push,” the company noted. The Softbank-led funding included investments from Exponential Ventures, Munich Re Venture’s ERGO Fund, G Squared, and CreditEase. Additional credit lines come from Credit Suisse and Goldman Sachs.

Fair’s partnerships include acquiring Uber’s Xchange Leasing portfolio in January 2018, which allows Fair to finance vehicles for Uber drivers. Additionally, consumers who fail to qualify for financing from Ally Financial Inc. may be funneled to Fair.

Fair raised $500 million in equity through yearend 2018. Since its inception in August 2017, Fair has provided cars for 20,000 users through its 3,000 dealer partners in 26 markets across the country, the company noted.

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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TransUnion is making efforts to support the “paradigm shift” in auto finance that has consumers looking at financing as the first step to the car buying process instead of the last, Brian Landau, senior vice president and automotive business leader, told Auto Finance News.

The credit bureau launched an online tool, Auto Payment Shopper, that prequalifies consumers for loan offers before entering the dealership, the company announced this week.

“About 20 years ago, auto websites were more about the vehicle and not about the financing,” Landau said. “Now you’re starting to see that change, and that’s great for lenders because now lenders become top of mind in the buying decision.”

With more than 60% of consumers initiating the car buying process online and 75% considering completion of the buying process online, lenders are embracing the digital disruption and many are trying to capitalize on that, Landau said. “Digital tools help support the lender initiative,” he added.

The tool works by prequalifying consumers and filtering inventory from their preferred dealers. In addition to seeing affordable inventory, consumers can use shopping tools that let them select and compare vehicles prior to applying for a loan.

“Lenders can build on their brand presence with consumers and offer a differentiated experience that reduces the amount of time spent at the dealership,” according to TransUnion. “Dealers benefit from higher quality leads and significantly reducing the administrative burdens of the car buying process that may have traditionally caused consumers to abandon the purchase. As a result, lenders are empowered to strengthen their relationships with dealers, which can lead to more booked loans.”

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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 Photographer: Christopher Dilts/Bloomberg

SAN FRANCISCO — Implementing artificial intelligence into servicing operations is top of mind for Chase Auto Finance in 2019, Chief Executive Mark O’Donovan said during a panel discussion at the American Financial Services Association’s Vehicle Finance Conference this week.

“We’re definitely looking to robotics and artificial intelligence for repossessions and the servicing space to improve control and efficiency for the back end of business,” O’Donovan said.

The bank is keeping other innovations on its radar, too, like autonomous vehicles and ridesharing. “Tech isn’t a new thing, and technology can’t fix a bad process,” he said. “It’s an enabler to improve the customer experience, dealer experience, and improve how the customer is interacted with.”

Chase Auto is being deliberate in its technology investments. “I look at what processes in the ecosystem we have and think about how technology could reengineer how we think about things,” he said. “The process is a huge opportunity, but the challenge is where do you invest or not?”

For instance, Chase Auto hasn’t allocated money for subscription services because of potential risk concerns, but investment in a subscription model isn’t completely out of the question.

“Subscription pilots out right now are more wholesale,” O’Donovan said. “But just because we don’t do it currently and see the risk doesn’t mean we aren’t going to move with the industry.”

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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Pedestrians pass in front of a Capital One Financial Corp. bank branch in New York, U.S. Photographer: Sarah Blesener/Bloomberg

Capital One Financial Corp.’s auto origination volume fell 5% last year, according to a fourth-quarter earnings report. In an earnings call, Chief Executive Richard Fairbank attributed the deceleration to an increase of competitive intensity in the auto industry.

Auto originations fell to $26.2 billion in 2018, compared with $27.7 billion in 2017. Despite Capital One’s shrinking origination volume, total auto outstandings grew 4.4% to $56.3 billion last year.

While Capital One’s auto loan delinquency rates increased 34 basis points to 6.85% at yearend 2018, the auto chargeoff rate improved 22 basis points year over year to 1.64% of the portfolio. Fairbank expects that rate to “increase gradually as the cycle plays out.”

For more content like this, check out our upcoming event Auto Finance Accelerate, May 13-16 at the Omni San Diego. Visit www.AutoFinanceAccelerate.com to register.

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Photographer: Daniel Acker/Bloomberg

Despite favorable lease residual performance driven by higher auction values, Ford Motor Credit Co. posted lower earnings last year, according to results released yesterday.

The captive’s full-year 2018 net income dropped 26% to $2.2 billion.

Lease penetration in the fourth quarter climbed 4 percentage points year over year, to 21%. The continued rise in leasing pushed 36-month lease return volume to 71,000 units, compared with 61,000 in the prior-year period.

Higher than expected auction values drove improvements in lease residuals, according to the report. In the fourth quarter, 36-month lease auction values stood at $17,865, an increase of 2.1% year over year. However, Ford expects auction values to decline 4% this year, reflecting the captive’s desire to lower lease returns, according to the report.

Overall, Ford Credit’s U.S. consumer financing portfolio grew 2.1% year over year to $53.3 billion.

Meanwhile, parent company Ford Motor Co. has been increasing its investments in mobility. Earlier this month, the OEM announced that it will spend the next 24 months undergoing global reshaping of operations in a bid to establish itself as a leader in the future of transportation and mobility. The OEM plans to reinvent the future of mobility by “transforming the company through operational fitness and allocating capital to high-growth and high-margin product segments and smart vehicles and services,” according to a Jan. 16 press release.

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Turn Your Bulk Auto Notes Into Cash