Originations rise in Q1 as affordability challenges, EV demand grow

In the first quarter, the auto finance industry balanced strong auto loan originations with persistent affordability challenges, shifting EV demand and rising asset-backed securitization activity.

Auto lenders, including PenFed Credit Union, Driveway Finance and Carvana posted strong first-quarter gains, signaling continued demand for auto loans, according to their earnings releases last week. PenFed’s originations jumped 88% year over year, while Driveway Finance’s originations rose 34.8% YoY and Carvana’s originations increased 59.3% YoY as digital sales and product expansion drove growth.

Affordability, however, remained a key constraint with Q1 earnings for dealership groups, including Asbury Automotive Group, Group 1 Automotive and Penske Automotive, showing declines in sales and mixed finance and insurance revenue. To offset pressure, dealers are leaning on longer loan terms and payment-focused financing strategies as higher vehicle prices and interest rates continue to affect consumers.

Meanwhile, OEM captive finance performance varied, as GM Financial’s originations declined 15.8% YoY, while Ford Credit reported higher finance and lease penetration in Q1. In addition, Stellantis returned to profitability, supported by higher vehicle sales and growth in its financial services operations.

Toyota reported a sales decline in March as weakening demand and geopolitical tensions tied to the Iran war weighed on performance.

Lenders are also expanding credit access to sustain growth, with Western Funding launching full-spectrum lending.

Wider market conditions shift

EV demand remains an industry focus, as Rivian’s deliveries increased 20% YoY in the first quarter, supported by growth in software and services revenue, according to its April 30 earnings presentation.

Auto ABS issuance rose 5.1% as of April 24. Lease ABS outperformed the broader market as investor demand remained steady, according to JPMorgan Securities data. However, potential changes to SEC disclosure requirements could increase regulatory risk for ABS issuers, adding uncertainty to the funding environment.

Lastly, Federal Reserve officials held interest rates steady although the split vote signaled growing internal division over the policy outlook amid heightened economic uncertainty.

In this episode of “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Deputy Editor Johnnie Martinez II and Senior Associate Editor Aidan Bush discuss top trends across macroeconomic dynamics, affordability, funding and powersports lending for the week ended May 1.

Subscribe to “The Roadmap Podcast” on iTunes or Spotify or download the episode.

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