Vipin Gupta, Group Vice President and Chief Information Officer, Toyota Financial Services

Toyota Financial Services’ newly appointed Group Vice President and Chief Information Officer Vipin Gupta seeks to usher in a future of mobility services to the captive, he told Auto Finance News.

He said TFS will drive innovation by focusing on three strategic objectives: agility, digital experiences, and using data and analytics to deliver new services. “The financial services business is an information service, or a digital service, by nature,” he said. “We don’t produce products, we produce decisions and experiences.”

TFS has already set in motion plans to deliver new services within the subscription space with its Lexus program, which is expected to launch by yearend for the OEM’s UX compact crossover.

“The subscription model or mobility model of the future is going to expand the capabilities of the business,” Gupta said. However, he finds it unlikely that subscription models will take over the auto industry. “It’s ‘and’ not ‘or,’” Gupta said. “One model won’t replace another model. We need to prepare for both.”

The captive will also leverage robotic automation to deliver more efficient customer experiences by automating back-office processes. Additionally, the company is developing an application programming interface (API) strategy to enable TFS to be a digital platform for its dealers, commercial customers, and various fintech partners.

“APIs will help [dealers] integrate with us with speed at lower costs,” he said. Incorporating the correct mindset and a clear understanding of the role technology plays to streamline operations is a “critical” component for the future of TFS, he said. “[The goal is] not to build more technology, it’s to build more business,” Gupta said.

Only about a month into his new role with TFS, Gupta will soon report to the newly appointed President and Chief Executive Mark Templin, who is set to replace long-time Chief Executive Mike Groff, on August 31. “We’ve got a fresh leader with broader responsibilities and a bigger agenda,” Gupta said. “As the new guy, I’m excited.”

© Can Stock Photo / mtmmarek

The hype around blockchain ranges from technology that serves as a convenient and more secure way to transact funds, to a revolutionary invention that’s going to remake and supplant the current state of the internet as we know it.

The reality for auto lenders is that the technology is still experimental, requiring further development before it can improve internal operations on a large scale.

Blockchain aims to eliminate many of the “middleman” processing that goes into payments and other financial functions by using a decentralized public ledger of the transaction history. It’s hard to tell what that means exactly in the context of auto finance, but given the amount of data that changes hands in the industry between consumers, dealers, and lenders, it’s easy to see how a tool designed to eliminate middlemen could be a benefit.   

Here are the top five trends auto finance companies are exploring today:

1. Capital Markets

Daimler AG’s captive arm Daimler Financial Services completed a 1-year $116 million capital markets transaction in late June that was initiated a year ago using blockchain technology and is looking to expand that success into other areas of the business.

“Blockchain can affect nearly the entire value chain. That’s why we, as a leading automaker, want to play an active role in the global blockchain community and help shape the cross-sector blockchain standards,” Kurt Schäfer, vice president of Daimler Treasury, said in a press release. “We want to do this in all the areas of application that are important to us: customer relations, sales and marketing, supplier management, digital services, and financial services.”

2. Setting the Rules of The Road

Chris Ballinger formed Mobility Open Blockchain Initiative (MOBI) so that auto lenders can help set the rules of the road when it comes to how blockchain is implemented throughout the industry.

MOBI partners with BMW, Ford, Faraday Future, General Motors, Groupe Renault, and some 37 other technology providers.  

“Working in a consortium allows MOBI and partners to create transparency and trust among users, reduce the risk of fraud, and reduce frictions and transaction costs in mobility, such as fees or surcharges applied by third parties,” according to a press release.

In particular, Ballinger believes smart contracts will help financial institutions fund more contracts and enjoy easier title transfers. Smart contracts are computer programs that can automatically approve borrowers based on predefined credit metrics. While lenders already utilize automated decisioning tools, blockchain makes the transactions more secure and doesn’t require an intermediator.

Smart contracts show how blockchain can streamline “cumbersome processes” captives typically deal with, but at a lower cost through a community database, Ballinger said.

Courtesy of Uber

3. Mobility Efforts

Blockchain technology can provide some exciting use cases as consumers explore how to gain more value out of their automotive assets through rideshare and carshare. 

According to IBM, which is a partner in MOBI, blockchain can help verify vehicle identity and vehicle history, track auto components through the supply chain, automate machine payments, establish a mobility commerce platform, and support usage-based insurance and taxes.

While many of these functions can happen separately, it’s the benefit of having everything streamlined under one system where blockchain has its advantage.

For example, having one system to independently verify a vehicle’s damage report, history, and maintenance helps ensure trust and reliability in the carshare ecosystem.

Via Car Auction Mall

4. Opening Up the Auctions

Given the benefits that blockchain brings to vehicle inspections and the supply chain, online auctions make sense as a proving ground for the technology.

ADX 365 launched a mobile auction platform this month for dealers based on blockchain technology.

“ADX 365’s innovative use of blockchain technology within the automotive industry will lead to an adaptation of how dealerships around the country participate in auctions,” the company stated in a press release.

© Can Stock Photo / AndreyPopov

5. Reducing Costs

As interest rates rise, small and medium-sized businesses will need as much help as they can get to improve shrinking margins.

A group called INVioU promises to utilize blockchain technology to manage the financial records and invoices of these middle-tier financial organizations to improve their profits.

Professor George Giaglis has been involved with blockchain since 2011 and joined INVioU last month. He’ll advise the group on how to reduce the financing and credit margins of small businesses, “especially those that would be otherwise prevented from entering the credit financing market due to their low transaction value and high-risk to lenders,” according to a press release.

“INVioU presents a very promising use case for blockchain, as it provides small businesses access to a decentralized invoice factoring marketplace, removing barriers to obtaining finance, neutralizing the risk of fraud and, as a result, reducing the overall cost of finance,” he said in the release. “I’m proud to support such efforts.”

© Can Stock Photo / karenr

Credit unions are taking advantage of the rising interest rate environment as some have grown loan volumes in their state by more than 50% year over year, according to Auto Finance News’ analysis of Experian’s July AutoCount data.

Namely, Security Service Federal Credit Union grew its Texas loan originations by 69% year over year to break into the top 10 lenders of one of the largest volume states in the country. Likewise, Lake Michigan Credit Union grew its statewide originations by 71% to 1,303 contracts signed.

Other credit unions have had strong — even if slightly more muted — growth in the past year. Navy Federal Credit Union grew originations by 21% year over year during the month of July to 2,578 contracts in the month as the second largest lender in Virginia behind Toyota Financial Services.

Meanwhile, in California, Golden 1 CU cultivated volume growth of 16.4% year over year and San Diego County CU raised originations by 21% year over year.

Dealers and startups have taken notice as well and are altering their strategies to accommodate credit unions. For example, the online car retailer JoyDrive targeted Seattle as an early market because its dealer partners were looking for a platform that could enable car buying online but still integrated with local credit unions.

“Early on we decided not to exclusively align with just one lender,” Hunter Gorham, chief executive and founder of JoyDrive told AFN. “The other aspect is the regional nature of it because we started in Seattle, where they have a massive credit union presence where you may not have that in Texas. Because we have dealers involved, they have a full network suite of dealers that they can offer to offer those financing offers within the JoyDrive website.”

Six of the top 10 lenders in Washington are credit unions including the No. 1 lender Boeing Employees’ Credit Union, according to AutoCount data.

“Boeing is so strong out here,” and as one of the areas largest employers, “it has been really healthy out here,” Shannon Harnish, president of Harnish Auto Family told AFN. “It’s a very good avenue for us Northwest dealers.”  

(L-R): Angela Ulum, partner, Mayer Brown LLP; Stefan Glebke, president, BMW US Capital; Jamie Feehely, managing director securitization, National Bank; Steve Hetrick, treasurer, NMAC; Amy Sze, executive director, JP Morgan Securities; Amy Martin, senior director, S&P Global Ratings

MIAMI — Captives are confident that the used-car market will remain stable despite the uptick in consumer demand toward SUVs and trucks, panelist discussed during ABS East 2018 on Monday.

“We don’t expect any crash,” Stefan Glebke, president of BMW US Captial, said during the panel, noting that the captive ensures supply is there as the consumer demand persists. “So far, we have nothing of concern when it comes to the [demand] switch.”

While overall vehicle values are currently at a historical high, sedans are lagging a bit. Adjusted wholesale prices for pickups rose nearly 9.8% in 2017, while compact car values rose only 3% as overall market prices rose roughly 6%, according to Cox Automotive’s 2018 Used Car Market report.

Despite some pullback in sedans from OEMs — such as Ford, Fiat Chrysler Automobiles, and General Motors — Nissan Motors is fully committed to the sedan market despite one of NMAC’s primary drivers of residual performance coming from consumer demand moving away from sedans to CUV, SUV, and truck segments.

“We had a weakening in sedans as SUVs came into favor but now they are performing better, not as well as the SUVs and trucks, but we are still very committed to the sedan market,” said NMAC’s Treasurer Steve Hetrick. Nissan’s netted ALG value is +0.64% for FY18, compared with -1.14% for FY17.

Toyota Financial Services is also confident in the strength of the used-vehicle market, Adam Stam, director of secured funding at TFS, told AFN. “We’ve seen [residual values] hold up surprisingly well, so we’re optimistic there won’t be a big shock to the system.”

Captives may be confident, but rating agencies do have concerns as residual values do come with risk in auto ABS transactions, said Amy Martin, senior director for S&P Global Ratings.

“Certainly there’s a lot of risks because potentially 100% of these vehicles can come back into the trust and the finance company is going to need to liquidate those vehicles,” Martin said. “But there are some ways the residual risks are mitigated.”

One of the main ways to mitigate that risk is ALG forecasting, Martin noted. “When we rate an auto lease securitization at a AAA level we take 26% off of that ALG forecast, and we are assuming it for the life of the deal, not some short-term period,” she said.

© Can Stock Photo / tuk69tuk

Roughly two years ago, the automotive market and the economy were heading for a peak year where lenders were aggressive, competition was stiff, and the economic environment was gaining strength. Since then, lenders have taken their foot off the gas, the economy has stabilized, and lenders have operated business as usual — while used-car values have risen to unexpected highs.

This year has been a curveball for lenders, with several factors causing what economists, lenders, and analyst are calling an “abnormal” appreciation in used-car values. First, the low interest rates dealers were used to touting are on the rise, spurring higher demand for used cars for consumers who have grown accustomed to lower payments and favor affordability over the expense of new vehicles.

Next, President Donald Trump threatened in June to slap a 25% tax on all imported auto parts. The move would hit manufacturers and trickle down to lenders, dealers, and inevitably consumers — bolstering new-car values and making used cars even more attractive.

In August, Manheim‘s Used Vehicle Value Index hit 139.7 — the second straight record high in in the index’s 20-year history.

“When you have this activity that’s out of the norm, the concern becomes what is going to happen and where is it going to go,” Doug Evans, senior director of remarketing for Hyundai Capital America, told Auto Finance News.

So how do captives and lenders adjust business strategies when used-car values increase instead of falling? Also, when will the trend reverse?

All Signs Point to Demand

Tariffs, rising interest rates, and an influx of new consumers returning to the market are three factors that point toward continued demand. Singularly, the signs wouldn’t trigger a significant increase in demand, but combined they create a different story.

“We don’t know if tariffs are pulling ahead, but we won’t discount it,” Evans said, noting that 10 days after the president announced the tariffs, there was a surge in used-car sales. “We believe it has some impact, but we would not align that 100% behind July sales.”

In July, 3.4 million used vehicles were sold — for a SAAR of 39.5 million units — compared with a 39.2 million SAAR in June, according to Edmunds.

The question surrounding the tariff threat becomes how new prices will rise in the short term, said Jonathan Smoke, chief economist for Cox Automotive. “It largely depends on having a firmer verdict on tariffs,” he said.

Tariffs on auto parts are predicted to have consumers seeing new-vehicle prices increase by $4,400, on average, according to an analysis by the Center for Automotive Research. This price increase favors growth in used-vehicle sales at the expense of new.

While looming tariffs is an uncertainty, rising interest rates is more than a consumer’s worry — it’s a fact. “Rates will be at least 50 basis points higher by yearend,” Smoke said. So far, the Federal Reserve has increased interest rates three times this year — representing the Fed’s optimism about the state of the economy.

But these rate hikes are translating into higher borrowing costs for cars. As of Sept. 14, the annual percentage rate on used vehicles was 5.14%, according to Informa Research Services.

For lenders, the rising interest rate environment is an important risk factor to monitor, Kevin Cullum, president of Nissan Motor Acceptance Corp., told AFN. “As a captive, we’ll continue support to help the dealers adjust their business models as we get back into a normal interest rate environment,” he said. “However, [interest rates] continue to be the biggest risk that we have to manage.”

Although NMAC and other captives can’t control interest rates, they can provide dealers with options like extended terms or flexible leases. “It’s all about making sure [dealers] have the cash flow that supports the business, and the interest rate is a huge piece of that,” Cullum said. “Awareness and planning are key.”

© Can Stock Photo / dmitrimaruta

It’s (Almost) Always About the Dealer

The foundation for higher used-car prices has been laid out in the past five years as dealer engagement in selling used cars has improved, said Jonathan Banks, vice president of vehicle valuations and analytics at J.D. Power.

“Dealers are buying [off-lease vehicles] and selling them through auction wholesale,” Cullum said. “They’re holding their values — well within the plans that [NMAC] had set three years ago, and in particular crossovers, they’ve been stronger. So the demand is there, and the residuals have been supported.”

In August, 3-year-old vehicles were worth 4.8% more than normal during this time of year, Manheim notes. NMAC, for one, has experienced this trend firsthand, Cullum said, as the captive’s off-lease portfolio shows 3-year-old vehicles in high demand.

At HCA, dealers have increasingly been buying the higher volume of off-lease vehicles “upstream” — that is, before they are transported to auction. That strategy has been the captive’s “secret sauce” to managing those values over time, Evans said. Buying upstream means that dealers are adapting to digital purchasing.

“This retail demand combined with the [price] appreciation has dealers flocking more to the digital and upstream to get to the inventory quicker, because they need it — rather than going to physical auction,” Evans said.

A strong CPO program is another driver of higher used-car values, since it allows off-lease vehicles to have a great landing spot, said Erick Gonzalez, national sales director for Hyundai Motor Finance.

“In this market, what we try to focus on is supporting dealer retail sales and profitability,” Gonzalez said. “Dealers have the right vehicle inventory to buy off-lease and carry to their used lots. Whether the cycle of used-car values goes up and down — it’s an enterprise. Anything that we can do to support dealers’ profitability, we will support that.”

What Lenders Do With Extra Funds

For lenders, the conservative thing to do when used-car prices drop less than expected is to “continue to assume weakness and reap the benefits from the unplanned strength,” said Chuck Berend, director of U.S. auto lending for BBVA Compass. “My instinct around the industry is that we are about to see many participants adjust strategy.”

Lenders understand that they can take advantage of higher-than-expected used-car values by keeping those funds safe for the “rainy day” when values decline. However, the best way for lenders to leverage the extra funds is to channel the additional profits into retail incentives to generate for the dealers and customers to support originations, Gonzalez said.

Moreover, the higher market values have the potential to mitigate losses, reducing the depreciation expense that benefits lender profitability, said a Toyota Financial Services spokesperson. “Lenders are required to estimate their depreciation expense by considering their expectations for future used-vehicle market values. This is typically performed through analytics that estimate the positive and negative impacts of the various factors that influence used-vehicle values.”

However, lenders should look at the extra funds as an “unexpected bonus,” Berend said, noting the savings from higher used-car values is relatively small compared with a lender’s general funds. Still, the extra cash can provide operational flexibility and remove some of the cost pressure that lenders face.

Still, lenders should proceed with caution. Where you are and how you operate will influence the way used-car values impact lenders. “It’s a bonus you cannot count on,” Berend said. “The more used-car values don’t drop when expected, the more lenders are waiting around looking for when it will drop.”

Editor’s note: This story was originally featured in the October edition of Auto Finance News magazine, out now. 

                      Courtesy of Kaboompics

LAS VEGAS — Personalization and transparency are top priorities in Toyota Finance Services‘ Lexus Complete Lease program, slated to launch in the first quarter of 2019.

The program is one of nearly half a dozen pilot programs the OEM has launched, including Flexible Lease through Uber, Car Sharing pilot in partnership with Get Around, and short-term lease pilot though Launch Mobility.

“We’ve done a lot of pilots, focus groups, and tests,” Matthew Heydon, TFS group manager, retail transformation, said at the 18^th annual Auto Finance Summit last week.

In September TFS announced that the 24-month, 20,000-mile limit program would bundle lease payment, car insurance, and maintenance coverage.

“Customers want personalization and transparency,” Heydon said. “For automotive, it’s transparency of price, transparency of a process.”

Toyota hopes the new pilot will offer simplicity through one payment for multiple services. The new leasing offer also aims to simplify processes. “We thought it was time, so we offered express purchase, but it wasn’t really about control of their time, whether it’s online or in the store,” Heydon said.

The program is not only aimed at younger consumers but those living in urban areas who may pay higher insurance premiums. The initial pilot, which is available for the 2019 UX Crossover model, will debut in Chicago, Boston, Los Angeles, and Miami. At the conference, it was also noted that the subscription-like model would include telematic services, such as hands-free calling and GPS.

Toyota declined to reveal the monthly payment amount for the program, how long the pilot program would operate, or which insurance provider the service would bundle with.

“We’re piloting a number of ideas for the purposes of testing and learning,” said Sabreen Dhillon, TFS senior manager of relationship marketing. “Typically, you have the traditional retail and lease products, and now it’s really about trying to get an understanding of what customers want, what they need, and what their actual behaviors are.”

General Motors Co. is reportedly hitting the pause button on its vehicle-subscription service, Book by Cadillac after launching nearly two years ago in Los Angeles, Dallas, and New York.

A GM spokesman confirmed the OEM plans to shut down the service by yearend, the Wall Street Journal reported. However, there is still a chance that the subscription service could make a comeback. “We are hitting the pause button for a brief time to make some tweaks to Book [by Cadillac] based on our learnings,” the spokesman said.

The OEM is notifying subscribers — who are currently paying $1,800 a month for the service — that they have 30 days from the time they are told to turn in their vehicles.

Though the exact reasons behind GM’s halt on its luxury subscription service are not known, the shutdown could reduce the hype around subscription services.

As long as direct-to-consumer leases or indirect leases are available to consumers, then that’s a more financially viable transaction than a subscription lease, Jim Houston, senior director of auto finance at J.D. Power, told Auto Finance News. “It’s the cost,” Houston added. “A [consumer] can lease a Cadillac for significantly less than $1,800 a month.”

However, Cadillac’s high subscription prices could be a move to offset residual values, said Larry Dixon, senior director of valuation services at J.D. Power. “Maybe Cadillac didn’t adequately prepare for the residual hit when [subscription] options are three months or six months, and the OEM is used to dealing with an average [term] of 36 months.”

The trend of luxury subscription programs started to take off at the beginning of last year, and GM was a trailblazer with the launch of its Book by Cadillac service in January 2017.

The Porsche Passport and Mercedes-Benz Collection programs followed suit, starting at or near $1,600 per month and ranging as high as $3,000 per month. There is also Access by BMW, which recently cut prices to $1,100 per month due to consumer demand.

Toyota Finance Services‘ Lexus Complete Lease program, slated to launch in the first quarter of 2019, is the captive’s take on a short-term lease option for consumers. The 24-month, 20,000-mile limit program would bundle lease payment, car insurance, and maintenance coverage.

Nissan Motor Acceptance Corp. has plans in the works to offer consumers a subscription service if that’s where the market continues to shift, company President Kevin Cullum previously told AFN.

While Cullum doesn’t believe subscriptions will have a substantial impact for another “20 to 25 years,” NMAC will join other OEM subscription services exploring the field, including Ford Motor Co., Hyundai Motor Co., and Volvo Cars.

“It comes down to getting money for the used vehicle,” Samuel Ellis, principal consultant for Auto Experience, told AFN. “These programs are just going to struggle until they can make the economics work. The discussion needs to center around, ‘What needs to be innovated?’ Describing [a lease] different doesn’t necessarily make it better.”

                          Courtesy of Pexels

Toyota Finance Services has deployed several pilots in ridesharing and car rental services. The company gave specific insight into the findings from two of these pilots at this year’s Auto Finance Summit.

“A variety of scenarios are going to coexist in the future, it’s between personally owned and shared, and autonomous vehicles and driver-driven,” Sabreen Dhillon, Toyota Financial Services, senior manager of relationship marketing, said in a presentation at the summit.

To work toward these future scenarios, Toyota partnered with Uber in December 2016 to test Uber drivers’ ability to make weekly payments on off-lease Toyota vehicles directly from rideshare earnings.

“In order to launch this pilot, we had to develop a number of capabilities, which included payment-splitting, customer data collection on things like GPS location, mileage tracking, and the handling of early returns,” Dhillon said.

The flexible lease program with Uber had a 24-month term, so the findings of this program are just beginning to make their way into new product offerings. Ultimately, Toyota has decided to expand the program with Uber.

“The goal is to bring autonomous rideshare at scale to market,” she said. “This means that Toyota is integrating its technology, along with Uber, into Toyota vehicles that are being put on the rideshare platform for continued research and development.”

A few key results from the Uber pilot will shape the way the program moves forward.

“We learned driver behaviors were varying widely, and that some people simply needed, or wanted access to a vehicle when they needed it,” said Dhillon.

This realization caused a shift from the focus on traditional ownership model that focuses on the sale of the vehicle to an access model, where the focus is on utilization rates. The resulting pilot, short-term rentals in partnership with Launch Mobility, launched in late 2017, is still proving itself.

“Early performance indicates that we’re already at about 30% utilization or 7 hours per day,” Dhillon said. “We see there is demand for it, but we’ll have to see how things progress.”

Check out the exclusive interview below, which is part of a special video series sponsored by White Clarke Group.

© Can Stock Photo / Feverpitched

The wave of direct lending is starting to swell, and lenders are working to initiate their programs before it crests.

“[Direct lending] is still small for us, and we’re looking at trying to stay in front of the fact that consumers’ expectations around, predominantly, information is evolving,” Jeffrey Danford, Ally Financial’s senior vice president of auto finance, told Auto Finance News. “We want to stay abreast of that.”

It’s better for lenders to invest, test, and learn from direct lending than be left behind on a consumer demand that is anticipated to take off within the next decade. It would be wise for lenders to dive into these waters early on.

“If you look at the long-term — about 10 years out — direct lending in some form will increase,” Danford added. “Consumers’ expectations of direct engagement with institutions across all industries is increasing. Call it the Amazon effect. Consumers are hungry for 24/7 transactional access. It’s logical to assume that consumers’ desire for digital engagement drives [direct lending].”

That desire for digital engagement extends to finance transactions, too. “Consumers are using mobile apps to access [financing] information, and that’s the way they expect to be interacted with, as well,” Jerry Bowen, executive vice president at Wells Fargo Auto, said during a panel discussion at the Auto Finance Summit 2018.

At only 2% to 3% of a lender’s portfolio, there are long-term reasons why investing in direct lending is more valuable to lenders than the amount of money it generates today.

The Ripple Effect

The importance of direct lending is becoming evident as top players in the industry have increasingly invested in direct-to-consumer platforms within the past year. Chase Auto introduced Chase Auto Direct, and Ally Financial debuted Clearlane. Subprime lender Westlake Financial Services is working on a direct lending portal, too, to be called Loan Center.

While many lenders shy away from disclosing specifics of their direct lending originations, OneMain Financial discussed its platform’s growth during its second-quarter earnings call. OneMain grew its direct auto portfolio 35% year over year, to $3.4 billion as of midyear, the company reported.

“[Direct auto] is about 22% of the portfolio this quarter versus around 18% a year ago, so I think we’re getting growth in our direct auto,” Scott Parker, executive vice president and chief financial officer for the lender, said on the call.

Half of the direct loans Bank of America made in the first quarter were originated via the online direct lending portal the bank debuted a year ago, Chief Financial Officer Paul Donofrio said during an earnings call in April. Bank of America declined to provide AFN with more recent details of its direct lending operations.

However, the bank, which started its direct-to-consumer mobile car shopping service alongside Dealertrack in 2017, is working on blurring the lines between direct and indirect models.

“It’s not an either-or situation,” Kal Valakuzhy, vice president and senior product manager at Bank of America, told AFN. “It’s up to the consumer to decide what works for them.”

“In our studies, we don’t see clients saying, ‘We want this way or that.’ Clients are looking for different options,” Valakuzhy added. “What works for one person doesn’t work for another. If a client wants to apply for a loan on the mobile phone or in person at a financial center, we’ll provide that.”

Additionally, the definition of direct lending today is a lot different than what it was several years ago, Valakuzhy said. “Before, a borrower would go into the financial center and apply for the loan on paper and go through basically the same process [as indirect],” he said. “That situation has changed. That’s not how direct lending is anymore.”

Today, consumers can sit in their houses and use their mobile phones to start an auto loan application while looking at the inventory of cars at a local dealership, Valakuzhy said. Once consumers make their selections, they pick up their vehicles from a dealership or wait for them to be delivered.

Lenders have to keep up with these innovations and adapt. Chase Auto sees substantial growth in its direct lending portal, Peter Gasparro, the bank’s managing director of business development and strategy, told AFN.

“There’s an enormous opportunity for the [direct lending] channel to grow. We have a sizable portfolio, but it is still single-digit share,” he said.

For now, Chase Auto proprietary research shows 76% of consumers still want to “kick the tires” and test drive vehicles before buying, while 47% would consider engaging in an end-to-end online car-buying process, Gasparro said.

“As the thought leaders in this industry, we have to ask ourselves this question: ‘Are we truly trying to improve that customer experience, or are we trying to transfer the economics to other players in the ecosystem?’” Gasparro said.

Consumers want to save time, they want transparency, and they want to trust that the transaction process is fulfilling. To that end, lenders better bring the dealer into the conversation and try to understand their economics as well as the fact that they’re a critical part of the customer journey, Gasparro said.

“They’re going to be there for servicing, and they’re going to be there to have the vehicle picked up.” Chase is still testing the impacts of a wide range of innovations from electric vehicles to subscription service models, and of course, it continues to experiment with its direct lending model.

“We’re always testing an experiment, including our direct model,” Gasparro said. “Have we nailed it? Absolutely not. We’re still trying to figure out what the cash and rates are and how to improve the customer experience.”

Transitioning to Digital 

© Can Stock Photo / SergeyNivens

It’s a revolutionary time for auto finance — lenders are staying at the forefront of innovation by experimenting and testing even more ways to dive into technology that meets consumer demand.

Completely direct lender USAA Bank is establishing itself as an innovative competitor with its augmented reality app pilot — a move meant to provide consumers with a holistic approach to the car-buying experience, Renee Horne, vice president of consumer lending experiences, told AFN.

The app allows consumers to scan cars on the road and apply for auto loans from local inventory right on the spot. “There’s plenty of runway for [direct lending], but at the end of the day, it means ceding share on the indirect side,” Horne said. “Ultimately [USAA’s] intent is to help facilitate that process for the member to make sure they go in there with the most insight, education, and full transparency throughout the process.”

The pilot ended November 1, but at press time the company was still evaluating its viability. “We’re curious to see how members respond and if it delivers on what we intend,” Horne said.

Capital One Auto Finance is also planning to incorporate augmented reality technology into its Auto Navigator carbuying platform.

Meanwhile, Clearlane is Ally’s platform to test, learn, and gain insight into changing consumer behaviors and expectations around direct lending. Although Ally does not break down data into direct-versus-indirect lending categories, Clearlane’s originations are a drop in the ocean compared with Ally’s $8.1 billion third-quarter volume.

“Our goal with Clearlane is partly transactional,” Danford said. “Do we care about the portfolio we’re building? Yes, but it’s more focused toward learning, experimentation, and understanding of consumer behavior relative to how that might translate into an overall better experience with the dealer, not eliminating the dealer, but that combined experience for the consumer.”

Clearlane is considering other enhancements, including artificial intelligence and machine learning, to better anticipate consumer loan qualifications, Danford said. Ally is also working closely with dealers to make the platform transcend the labels of direct and indirect.

“Banks can play on both sides of the fence, and it just moves from one side of the business to the other,” David Hollodick, Bank of America’s senior vice president of consumer vehicle lending, told AFN in January. “Maybe banks’ balance sheets aren’t impacted, but how they lend the money changes over time.”

Bank of America reported a $50 billion auto loan portfolio for the third quarter, with 2,700 auto dealers now participating in its digital shopping experience. The bank’s direct lending platform also allows consumers to see live inventory online at 2,000 participating dealerships.

Additionally, Bank of America rolled out digital capabilities across its consumer lending online platform including Erica, a digital assistant that can help with auto loans and other financial products. Last year, the bank became the finance provider for Volvo Cars’ new subscription service.

Wells Fargo Auto is focused on improving the challenges dealers face to build relationships with consumers in the digital age, Bowen said.

“The No. 1 issue dealers raise to me right now is having a relationship with consumers in the digital age, because most dealerships built their business on [in-person] relationships,” Bowen said, noting that in the past consumers would come to the dealership four or five times before finalizing a purchase.

Today, consumers show up to the dealership once. “The dealer understands that he or she has one shot to get it right,” he added. “The consumer comes to the dealership educated and expects a fast and efficient experience. Dealers need to make that experience fast, consistent, accurate, and engaging. Slow is not going to provide a good outcome.”

© Can Stock Photo / gongzstudio

Captives Adapt to the Amazon Effect

Since captives operate as completely indirect financing models that rely heavily on the dealer, captives have to explore their own ways of tapping into the digital consumer demand.

Today, dealers are typically working with better-educated consumers that may be more knowledgeable than the sales consultants they’re working with, said Jim DeTrude, vice president of sales and marketing at Nissan Motor Acceptance Corp.

“There’s plenty of opportunities for the dealer to get that consumer moving right before they go to the store,” DeTrude said. “The other thing is the data that’s available. We must figure out how to utilize that effectively. How do you proactively work with your dealer and customer while having access to that data to make a difference?”

NMAC has no intentions of abandoning its dealer distribution network and indirect lender business model, NMAC’s President Kevin Cullum, told AFN. “The only direct lending we do is on a commercial B2B basis and primarily directed at automotive retailers.”

As a captive lender, NMAC relies on its dealers as a source of retail and lease contracts. “We will be offering the opportunity for consumers to apply directly to us for pre-approval of credit and vehicle purchase, financing, and contracting through Nissan and Infiniti dealer websites.”

Toyota Financial Services also has no intentions of disrupting its traditional model of indirect lending. However, that strategy doesn’t stop the captive from enhancing its technology to provide the consumer with options.

“Dealers want TFS part of this equation, and we still have to work together to figure out a little better what that new shared responsibility in retail spaces are as we go,” said Matthew Heydon, group manager of retail transformation at TFS.

The captive is testing pilots that include the dealer, said Sabreen Dhillion, senior manager of relationship marketing at TFS. “Whether it’s rideshare, whether it’s carshare, or short-term rentals, the dealer is a part of the equation in all of those,” she said.

One of the newest pilots is TFS’ Lexus Complete Lease program, slated to launch in the first quarter of 2019. The program is one of nearly half a dozen pilot programs the OEM has started, including Flexible Lease through Uber, Car Sharing pilot in partnership with GetAround, and short-term lease pilot though Launch Mobility.

As the industry moves from a retail process that was manual in many dealerships to one where the transactions for consumers will take place at home, it’s important for lenders to understand that finding the right solutions won’t be a crystal-clear process.

“As an industry, we see and know where [technology] is heading, but the path will be messy along the way,” DeTrude said. “Technology is volatile. Not in a negative way — it’s exciting.”

Editor’s note: This story was originally featured in the November 2018 edition of Auto Finance News’ digital magazine, out now. 

The December 2018 issue of Auto Finance News is now available.

From the December issue: Customer experience is seen as the key to attracting and retaining consumers in an increasingly digital world.

Unfortunately, providing quick and easy interaction has not been auto financing’s strong point. Historically, car buyers have been left feeling overwhelmed with paperwork, confused by ancillary products, and exhausted from negotiating price options. However, providing a great customer experience is what creates today’s brand loyalty.

“There is power in brands that play an extremely strong role in society,” Grayson Brulte, president of consulting firm Brulte & Co., told Auto Finance News. “There will only be more play with businesses if consumers like and trust the brands they recognize.”

The auto finance community is getting the message. A number of forward-thinking lending and software companies, including Toyota Financial Services, Wells Fargo Auto, Nissan Motor Acceptance Corp., and CU Direct, are developing innovative features and transforming their customer service operations to better engage customers. What follows is a detailed look at some of the more interesting efforts.

Toyota Financial Services Opens Communications

Toyota Financial Services is well known as the captive that is innovative and takes the time to evaluate pilots, focus groups, and tests before rolling out new features. The way the captive approaches consumer experience initiatives is no different.

Among its latest initiatives are two developments aimed at improving customer communication. The efforts began after the captive evaluated feedback employees received from customers, said Anna Sampang, vice president of service operations. And many TFS customers have been asking about titles.

“One of the biggest demands from our consumers has been: ‘Where’s my title?’” Sampang said. As a result, TFS is launching a title tracker on its website that will allow consumers to monitor via the TFS website where their vehicle is in the titling process.

“As a consumer, I have to keep calling back to find out how the title progresses,” she said. Now, with the title tracker, a consumer can check in on the status. “It gives [consumers] comfort that there is action to their request, and they still have the choice to call their lender or dealer.”

The titling feature is now available to dealers and internal TFS staff, who say it enhances the amount of confidence they have when having a conversation with customers. TFS has not set a release date for the new feature, but Sampang said it will be rolled out “in the near feature.”

A second customer-experience initiative is a text service called Lease Maturity. The service pings lessees that their leases are coming to an end. Once a consumer opens the text, there will be a link directing consumers to a comprehensive checklist that provides all the information needed to prepare consumers for returning vehicles and what to expect at the end of the lease term. The service was rolled out in September.

“We want to provide proactive communication through the correct channel to our consumers,” Sampang said. “The campaign is designed to alert customers about their upcoming maturity and provide them a checklist to prepare consumers for returning the vehicle and what to expect after they finish their lease.”

Consumers these days expect a text channel for communication, and TFS says it’s responding to their preferences. “Consumers will simply get a [text] notification from their lender saying, ‘Your maturity is up,’” Sampang said.

As for consumer reaction to the new feature, “early indicators show that consumers appreciate a gentle reminder, as they often forget their maturity date,” Sampang said. “Consumers like transparency regarding what [consumer] obligations are and what the process will be,” she added. “Our goal is providing information and [limiting] the number of lease accounts that pass maturity, but our results are still pretty new.”

© Can Stock Photo / peshkova

Wells Fargo Auto Revamps Operations

Wells Fargo Auto has spent the past 18 months transforming its business to better serve its customers, Jerry Bowen, executive vice president, told AFN.

While the Wells Fargo & Co. brand has come under fire for improper sales practices, the auto unit is focused on creating a transparent relationship with customers with an emphasis on simplification wherever possible. “We’re investing in improving the customer experience from start to finish — including improving the onboarding experience and rewriting customer correspondence to feel more conversational,” said a Wells Fargo spokeswoman.

The company is also putting auto customer service team members through new training that focuses on active listening skills, building rapport, and understanding different social styles. “In addition, customer service representatives are now more empowered to make decisions that allow for first-call resolution,” the spokeswoman said. “And auto has eliminated some fees — like telephone payment fees — for its customers.”

The bank also recently trained team members who staff its mobile response units — large trucks that travel to areas affected by natural disasters — to answer customers’ questions about options available if they’ve been impacted by natural disasters.

“Part of [Wells Fargo Auto’s] business transformation includes looking for ways to improve the experience for consumers by finding ways to use technology to improve human interactions and give team members tools that make it easier for them to walk in its customers’ shoes,” according to the spokeswoman.

“We are continuing to transform Wells Fargo to deliver what customers want — including innovative, customer-friendly products and services — and evolving our business model to meet those needs in a more streamlined and efficient manner,” Chief Executive Tim Sloan said during a companywide town hall meeting in September.

The bank is considering digital innovations to meet all of its customer experience goals.

“We recognize that customers — both dealers and consumers — are looking for ways to make their auto financing experiences more informative and streamlined, and are increasingly leveraging digital to get there,” the spokeswoman said. “We are continually looking for ways to meet customers where they are and how they what to interact and provide more opportunities to engage with us digitally,” she added.

 NMAC Targets Used-Car Market, Mobile Apps 

© Can Stock Photo / happyalex

Among Nissan Motor Acceptance Corp.’s latest consumer experience initiatives are providing better service to used-car customers in partnership with CarFax and building out its mobile capabilities through a relationship with AutoGravity.

The lender says it’s also looking at new online payment mechanisms. For many OEMs, a strong certified pre-owned (CPO) program is a way to drive consumer loyalty. It allows off-lease vehicles to have a great landing spot and ensures continued brand loyalty.

“Our service level on the consumer side have improved over the last year,” said Kevin Cullum, president of NMAC. “A strong CPO option, as an example, is a great way to bridge that gap for customers who may be used to the brand but cannot necessarily afford the cost of a new car payment yet.”

As the U.S. Federal Reserve gradually increases interest rates, the demand for used vehicles rises with it, Cullum said. “Our CPO program continues to grow on a monthly basis and year over year, and I attribute that increase not only to awareness of the brand but also to the residual impact of rising interest rates that will increase the cost of ownership and financing for consumers.”

To that end, Nissan expanded the role of Carfax in the Nissan and Infiniti CPO programs, the companies announced earlier this year. The new expansion means consumers receive service and recall alerts for their vehicles from Carfax via the myCarfax app.

The app displays consumers’ service histories and alerts consumers when it’s time for scheduled maintenance such as oil changes, tire rotations, vehicle registration, and safety and emissions inspections. The Nissan or Infiniti dealer is also designated as the customer’s favorite shop within myCarfax.

The enrollment option is new, but Carfax and certified Nissan and Infiniti dealers have worked together since 2012 to run Carfax reports on all CPO-eligible vehicles.

“Nissan’s decision to register their CPO customers with myCarfax helps reduce the cost of car ownership while increasing certified dealer revenues,” Vern Poyner, general manager at Carfax, said in a statement. Nissan North America is the first to make customer enrollment in myCarfax part of the CPO purchase process.

Aside from a focus on its CPO program, NMAC looks to “provide consumers the most seamless automotive financing process possible,” Cullum said. “We use smartphones to manage many aspects of our lives, so it’s only natural for digital to be the next evolution in automotive financing.”

To that end, NMAC is working with AutoGravity, the fintech company that allows users to find vehicle financing options through its mobile app. The captive’s offerings are now available on the platform. Consumers shopping on AutoGravity for Nissan’s vehicles, including the luxury Infiniti brand, have access to the captive’s financing options.

NMAC says users shopping across a wide variety of brands will appreciate the rates a captive can provide. “With our participation on the AutoGravity app, we are able to utilize this cutting-edge technology to connect with digital-savvy consumers and provide them with NMAC loan and lease preapproval options,” Cullum said.

A well-designed mobile app has become one of the most critical drivers of customer satisfaction with auto lenders, according to J.D. Power’s 2018 U.S. Consumer Financing Satisfaction Study.

“As the auto shopper journey becomes increasingly digital, it’s critical for auto lenders to get the mobile app formula just right,” said Jim Houston, senior director of automotive finance at J.D. Power.

“While mobile app utilization is still highest among younger generations, older customers who interact with auto lenders via mobile app experience even higher overall satisfaction than their younger counterparts,” Houston said. “Mobile is no longer a generational or niche offering; it is now the window into the auto lending experience.”

Additionally, NMAC is looking to create more channels to allow consumers to submit payment via text or through an online portal, Brian Massey, NMAC’s director of collections and loss recovery, told AFN.

“We’re looking at different ways for customers to be able to make those payments because so many people are moving to mobile,” Massey said. “You’ve got to be able to make that process easier.” What it comes down to is loyalty, and the loyalty that comes with being a captive, Massey added. “Between leasing and retail, with Nissan and Infiniti [we] try to help customers go back to a Nissan-Infiniti store for their next car. It’s very important to us, and it’s very important to the motor company, as well.”

© Can Stock Photo Inc. / sqback

CU Direct Provides Machine Learning Tools 

CU Direct, a technology developer that works with more than 1,100 financial institutions, is helping credit unions make better underwriting decisions with a machine-learning-based loan origination system.

CU Direct’s product, called Lending 360, uses machine learning, or ML, which is a form of artificial intelligence that can quickly sort through massive amounts of data, find patterns, and make predictions.

For credit unions, it automates much of the loan approval process. And, of course, it speeds loan approval notifications, creating a good customer experience. Lending 360 is used by more than 135 credit unions including Allegiance, Premier America, and Vantage West credit unions.

In November, First Financial of Maryland Federal Credit Union, with $1.1 billion in assets, became the latest to sign on. Dan Kriebel, First Financial’s chief lending officer, said that the financial institution’s quest to find an automated underwriting solution was centered around customer service.

“Through our RFP process, we reviewed four major industry providers, with our primary objectives being to provide members with a more simplified, convenient, and streamlined lending experience,” Kriebel said in a statement. “Our primary objectives being to provide members with a more simplified, convenient, and streamlined lending experience.”

Specifically, the credit union was looking for a loan origination system with strong workflow efficiency, compliance, cost, reporting capabilities, ease of installation and execution, and cultural compatibility, Kriebel said, adding that the lender found everything it wanted in Lending 360.

While using ML to make loan origination decisions is considered innovative today, it won’t be for much longer, according to Brian Hamilton, vice president of innovation at CU Direct. “Today [ML] is a cool, competitive advantage, but within two years, it will be table stakes, so I’m encouraging the movement to start acting on this today.”

The January 2019 issue of Auto Finance News is now available.

From the January issue: 2018 was a strong year for auto finance as delinquency rates dropped, the economy grew, and consumer demand remained high.

However, the new year finds lenders and analysts bracing for an economic slowdown. But that’s not the only worry. New-car purchases are lagging, according to Manheim’s November data, which has new-vehicle sales down 0.7% year over year. On top of that, rising tariffs and higher interest rates could stymie growth in 2019.

“In some ways, it’s a house of cards,” said Jessica Caldwell, executive director of industry analysis for Edmunds. “As access to cheap and easy credit grows scarce, many buyers may be forced into the used market, or even be priced out of a purchase completely. If, for some reason, the economy suddenly collapses or if tariffs are enacted and raise prices even more dramatically, things could take a turn very quickly.”

Lenders that will thrive in the new year will be the ones that are prepared.

“The worst position [a lender] could be in is being surprised, not having a plan, and trying to improvise when confronted with an issue,” Marcelo Brutti, chief risk officer at Hyundai Capital America, told Auto Finance News. “Our job is to monitor all of [the risk factors] and make sure that those we can manage have discipline. We have to understand the potential economic cycle and be ready for it to protect the captive, the OEMs, dealers, and the reputation of the brand.”

Industrywide, lenders are starting to bump up subprime volume, extend loan terms, and increase technology investments, particularly in data and analytics that allow lenders to better track performance.

The Subprime Sector

Following a pullback from the subprime sector in the past few years, originations to credit-challenged borrowers are expected to account for 16.5% of loans in 2019, compared with 15.1% in 2018, according to TransUnion’s 2019 consumer credit forecast. Positive economic trends and opportunities to boost profits are spurring growth in subprime, Brian Landau, senior vice president and auto line of business leader at TransUnion, told AFN. Specifically, lenders feel more confident going back to subprime because of macroeconomic performance like stabilizing delinquencies and a low unemployment rate, he said. The 60-day delinquency rate is anticipated to stay flat at 1.44% through 2019. “The auto market is starting to recalibrate itself after the pullbacks in [2016 and 2017],” Landau said. However, the competition for subprime loans will likely increase. “If [one lender] is going to tap into subprime consumers, so are other lenders,” Landau said. “The profit is in subprime, and lenders have to make money.”

Loan Extensions

With affordability in question and subprime originations expected to climb, it’s important for lenders to come up with strategies to avoid delinquencies, David Gemperle, a partner at Nisen & Elliott LLC, told AFN. A loan extension is a common tool for keeping delinquencies in check.

However, extensions done wrong can result in liability, Gemperle said. “Loan extensions are a short-term solution that has potential consequences and higher losses down the line,” he said.

The problem is that some lenders will do what is necessary to avoid repossession and higher defaults. “If lenders don’t do loan extensions, then they have a repo,” Micky Watts, senior vice president of indirect lending at Anderson Brothers Bank, told AFN. “When [lenders] are looking at an $8,000 to $10,000 loss, loan extensions make sense.”

However, extensions are inherently risky because the longer a loan is on the books, the tougher it becomes to pay down and the greater the risk of negative equity. “Longer loan terms will only expedite that situation,” said Anil Goyal, Black Book’s executive vice president of operations.

To that end, lenders need to understand that not all used vehicles depreciate at the same rate, and there are opportunities to leverage residual forecasts in the underwriting process to evaluate which cars are better suited for loan extensions, Goyal added.

“[Loan extensions] could be poison for the industry,” Joe Cioffi, chair of the insolvency, creditors’ rights, and financial products practice group at Davis & Gilbert, told AFN. A red flag to watch out for is an unreasonable reliance on loan extensions being used to offset what would be higher monthly payments.

“When lenders are thinking of strategies, it’s important to think: ‘What about the long-term risks associated with that?’” Gemperle said. The longer the loan term, the greater the chances a borrower will face financial hurdles.

Lenders also have to be careful to explain the effect of an extension to the borrower and to ensure that programs pass compliance, Gemperle said. For instance, in November 2018, Santander Consumer USA finalized an agreement with the Consumer Financial Protection Bureau to pay a $2.5 million fine and more than $9 million in restitution after allegations that it misled consumers regarding loan extensions. Santander told consumers that loan extensions would move monthly payments to the end of their loans but failed to explain to consumers how or when the accumulated interest would be repaid, according to the CFPB’s claims.

Santander agreed to settle without admitting or denying the CFPB’s claims.

Another situation with folded lender Honor Finance, which handed over its portfolio to Westlake Financial Services in August 2018, was primarily due to poor practices regarding loan extensions.

“Honor granted an extraordinarily high number of payment extensions to borrowers,” Cioffi said. Although Honor took the practice to a dangerous level, it is common in the industry. “So much so, that S&P Global Ratings is recommending that going forward investors monitor the level of extensions in their deals,” Cioffi added.

Extensions can also increase risk, Cioffi said, because extensions are requested by financially troubled borrowers and allow interest to accrue during the deferral period — something borrowers do not always understand — ultimately increasing the amount to be repaid.

© Can Stock Photo / Andreus

Technology: Data and Analytics

One analyst argues that with the technology and data available for lenders today, there is no excuse for flawed loan extension practices. “The data to decide on loan extensions is more sophisticated than ever before,” said Lou Loquasto, the auto vertical leader at Equifax.

Lenders should be able to use the technology available today to properly vet loan extensions, but each borrower situation is different.

Indeed, tech is playing a bigger role in financing as buyers increasingly look for lenders to provide digital options for communication and payment. Nissan Motor Acceptance Corp. and Toyota Financial Services, for instance, are meeting their customers’ expectations with new web portals, text communications, and mobile apps.

And a number of lenders are partnering with tech companies to make loan applications and servicing more attractive.

BMO Harris Bank, for instance, in December 2018 started to accept online auto loan applications in California through a newly inked partnership with AutoGravity. Earlier this year, Infiniti Financial Services, Kelley Blue Book, Santander Consumer USA, and TD Auto Finance also partnered with the auto marketplace.

AutoGravity’s platform connects car shoppers with lenders and dealers. It provides prequalified finance offers from partnered dealerships listed on the AutoGravity site. Buyers can use their computer or smartphone to browse local inventory for new or used vehicles, shop by monthly payment amount, and apply for financing directly through the platform.

Technology innovations have made access to credit easier for consumers, as well, with alternate ways lenders can evaluate potential borrowers besides traditional Fico scores.

However, “the issue can actually be too much available credit given rising interest rates,” Cioffi said. “Alternatives to Fico that take into consideration bank accounts and check payments will make even more credit available.”

There’s a risk with greater accessibility to credit, and lenders need to be wary. “Consumers can get the false impression that if a lender is willing to make the loan, then they must be able to afford it,” Cioffi said.

With industry apprehension that a market slowdown is near, it is critical for lenders to understand that the next few years will be a risky time to grow the loan business through expansion of criteria. But data and analytics, combined with the proper investments in IT, can help lenders manage their businesses.

The key is to implement an IT strategy that supports its future business model. Alternatively, if a lender is pursuing the wrong business model, then its IT infrastructure will be of little help.

“Where you’re investing your money today might not be correlated with the business model that might be the right model in the future,” Brutti said. “As a captive or as a bank, we’ll try different things, and we’re all trying to figure it out.”

The question is: What is going to be the business model in the future? With subscription services, autonomous vehicles, electric vehicles, carsharing, direct lending — it’s vital for lenders to be prepared for the future of financing.

“We don’t see anything disruptive in the short term,” Brutti said. “We see these potential products in the future, and it’s an opportunity cost. If you don’t do it, somebody else will do it. There is more risk in not doing anything than in trying something. Whoever else does it, it will take that business away from you [in regard to] profitability, customers relationship, loyalty, and potentially sales — that will be one of the risks for 2019.”

“If there’s a threat to the business model, decide how you address it,” Brutti added. “You can do it on your own, and you can pick a partner, you can do a pilot. Then learn how to mitigate risks for each factor.”

© Can Stock Photo / AndreyPopov

A number of auto manufacturers, finance operations, and government bodies have new people at the helm, ready to leave their marks. The following are AFN editors’ picks for 4 people to watch in 2019:

Kathy Kraninger

Kathy Kraninger succeeded Mick Mulvaney as director of the Consumer Financial Protection Bureau in December 2018. Kraninger’s first official move was to scrap the CFPB’s name change, determining it would be too costly for lenders, she wrote in an email to the bureau staff. She plans to tackle a number of auto finance issues in 2019, including wrongful repossessions, ancillary products, payday lending, and fintech practices.

Michael Manley

Michael Manley, former head of Jeep Brand, was named Fiat Chrysler Auto CEO in July. Manley succeeded Sergio Marchionne, who died that month. FCA said Manley will follow through with the implementation of the 2018-2022 business strategy established on June 1 by Marchionne, a plan that includes forming FCA’s own captive finance arm.  “Marchionne was a dynamic leader, but the decision to form a captive runs much broader and deeper than just one person,” Jack Micenko, bank and auto finance analyst with Susquehanna Financial Group, told AFN.

Maxine Waters

Rep. Maxine Waters (D-Calif.) is the new chair of the House Financial Services Committee and is already considering legislation to undo some of the structural changes former CFPB Acting Director Mick Mulvaney made at the agency, including the reorganization of the Office of Fair Lending. Additionally, a Democrat-controlled House will likely subpoena auto lenders for information about their practices, bumping up the threat of reputational and headline risk in 2019. “The House can’t make any regulations, but it can put practices into the news to get the attention of a congressional committee,” Chris Willis, a partner at Atlanta-based Ballard Spahr LLP and practice leader of the firm’s consumer financial services litigation group, told AFN.

Mark Templin

Mark Templin was appointed the president and chief executive of Toyota Financial Services in August 2018, taking over for longtime executive Mike Groff, who retired. Templin was executive vice president of Lexus International. With an insider taking the helm, Templin “brings a global depth of knowledge and experience in both the finance and automotive sides of the business,” Groff said in the release. “He understands how to meet the needs of our dealer partners and our distributor affiliates.” Groff, who joined Toyota Motor Credit in 1983 as the company’s seventh employee, became president and chief executive in 2013.

Year-to-date auto securitization volume hit $57.8 billion at the end of April, with prime loan issuance accounting for the lion’s share of transactions, according to research released today by Deutsche Bank.

Prime loan securitization volume totaled $23.7 billion, and subprime volume reached $12.8 billion. The remaining volume was comprised of retail lease ($9.8 billion), fleet lease ($2.7 billion), rental car ($2.7 billion) and dealer floorplan ($5.1 billion).

That’s the good news.

The bad news is delinquencies have been climbing in the 13 securitizations tracked by Deutsche Bank. For prime securitizers, 60-day delinquencies rose nine basis points in 2016 vintages and six basis points in 2017 and 2018 vintages. For subprime securitizers, 60-day delinquencies rose one basis point in 2016 vintages and 24 basis points in 2017 and 2018 vintages. Based on historical seasonal trends, Deutsche Bank expects auto loan delinquencies to “rise incrementally month-over-month through year-end,” according to the report.

Deutsche Bank tracks securitization performance trends from Ally Financial, American Credit Acceptance, American Honda Finance, CarMax Auto Finance, DriveTime, Exeter Finance Corp., Ford Motor Credit, GM Financial, Hyundai Capital America, Nissan Motor Acceptance Corp., Santander Consumer USA, Toyota Financial Services and World Omni Financial Corp.

The online used-car marketplace is heating up in the U.K. as one London-based startup secured $13.9 million in Series A funding this week. The round was led by hedge fund Marchmont Ventures and LocalGlobe. 

The platform is called Motorway and enables U.K. consumers to buy and sell used cars online. The startup, launched in 2017, lets car sellers see live offers from multiple car-buying services and dealerships. Consumers can compare offers, buyer reviews, and fees and delivery options to find the most attractive deal. 

In the past 18 months, Motorway has achieved $165.2 million worth of completed car sales through its buyers and has grown to more than 100,000 monthly customer sales inquiries, the company noted.

With the new funding, Motorway will “double down” on building its car sales platform for consumers and enabling car buyers to improve their stock acquisition process at scale, Chief Executive and Co-Founder Tom Leathes said in a press release, noting that Motorway is focused on helping the U.K. used-car market that is going through “unprecedented change,” he said. 

The latest investment props up the company’s funding to a total of $17.4 million. Last year, the startup raised $3.4 million in seed funding from Marchmont Ventures and LocalGlobe. 

Alternative platforms for car ownership are gaining traction in the U.K. Earlier this month, Toyota Financial Services became a finance partner to U.K.-based Vantage Motor Group as the dealer chain looks to expand its online vehicle sales platform. In May, the captive bought a majority stake in London-based ride-sharing startup Faxi to engage in new mobility solutions.