Auto lending report, May auto sales, Stellantis' cheap EV

Hey everyone. Excited to let you know that another CDG Market Update dropped today. In this edition, Edmunds’ Jessica Caldwell and Zac Kinch of Bob Rohrman Toyota share the latest car market insights and answer your most pressing questions about the industry.

— CDG

1. Data on prime, sub-prime car buyers exposes troubling lending habits

Top line: New research suggests some auto lenders are overlooking critical data when making credit approval decisions.

At a glance: Open Lending’s report on auto loan trends reveals that the share of near- and non-prime consumers has reached a five-year low. 

By the numbers:

• Just 14% of new car buyers are near-prime or non-prime, down from 20% in 2019.

• Only 35% of used car buyers are near-prime or non-prime, down from 42% in 2019.

• Delinquencies among buyers that qualified as mostly-prime and above rose 8% in 2023.

• Conversely, the rate of delinquency declined 12% in the near- and non-prime categories.

Key quote: “Cautious automotive lenders are focusing their lending strategies on prime borrowers, but this approach is not protecting their portfolios in the way they’re hoping,” said Open Lending Senior Vice President of Marketing Kevin Filan.

• Open Lending attributes this shift to the practices creditors are using to approve buyers.

• Rather than thoroughly checking a borrower’s history for more insightful data, most financing institutions are denying loan applications based primarily on credit score.

• Only 40% of lenders are using more thorough analysis to determine a consumer’s creditworthiness.

What this means: Lending firms are approving prime buyers with red flags in their credit reports while also overlooking sub-prime buyers with a strong payment history.

EVs are unique: While the number of sub-prime buyers is disappearing from the majority of the market, they’re actually increasing in one particular segment: electric vehicles.

• New EV registrations among near- and non-prime consumers rose 161% year-over-year in Q4 2023, followed by 100% for used EVs. 

Of note: These buyers are still the minority (8%) in this segment, but as interest rates come down and electric cars get cheaper it will be interesting to see how this trend develops.

Bottom line: Auto lenders are more discerning than ever when it comes to approvals, but some aren’t making decisions based on the full picture of a buyer’s credit history.

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2. New car sales projected to jump in May on more incentives, supply

Top line: New car sales are projected to jump in May after hitting a small speed bump in April, teeing the industry up for a successful second quarter.

Driving the news: S&P Global Mobility is forecasting both a year-over-year and month-over-month improvement in new vehicle sales volume, driven by better inventory levels and the return of incentives.

By the numbers:

• New car sales are set to hit 1.4 million units this month, up 3% from May 2023 and 7% from April 2024.

• The sales pace is mostly flat, resting at a seasonally adjusted annual rate (SAAR) of 15.6 million units, compared to 15.7 million last month and 15.5 million last year. 

• Trucks are driving the vast majority of that SAAR, accounting for 12.6 million units. Passenger cars represent only 3 million units.

• New vehicle inventory is still on the rise, rising 1.3% from March to 2.77 million units at the start of May.

• In our most recent Car Dealership Guy Market Update, Jessica Caldwell, Head of Insights at Edmunds, noted that the average interest rate on a new vehicle is over 7% (more than 11% for used).

• Monthly payments are also on the rise. New vehicle buyers are still spending well over $700 a month on auto loan repayments.

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3. Stellantis changes course, promises $25,000 electric Jeep for U.S.

Top line: Stellantis is working on a $25,000 electric Jeep for the U.S. car market as it faces sales pressure from competitors on both sides of the Pacific.

Driving the news: Speaking at an investor conference on Wednesday, Stellantis chief Carlos Tavares revealed that a budget-friendly battery-powered Jeep would be coming to North America “very soon.” The executive compared the upcoming model to the Euro Citroen e-C3, a Europe-only electric hatchback priced around $25,200.

In the U.S.

• Sales across the company’s North American lineups have been on a stubborn decline for multiple years, falling 1% across all of 2023 and 10% in Q1.

• To put Stellantis’ challenges into perspective, we need to look at the days’ supply of their top U.S. brands, Jeep and Ram.

• According to Cox Automotive, supply levels at both companies were over 152 days this month, more than twice the industry average at the end of April. Chrysler and Dodge were only slightly better, at 143 and 151 days, respectively.

In China

• Meanwhile, China has put all automakers on high alert due to the strong performance of its domestic automakers.

• While not alone in this respect, Stellantis’ sales in the region plummeted 46% year-over-year over the first quarter.

• It doesn’t stop there. BYD, China’s biggest electric car manufacturer, recently introduced the Seagull, a petite hatchback that costs less than $10,000.

Bottom line: It appears that Tavares may have softened on his views against cheaper EVs in response to the pressures facing Stellantis in the U.S. and China. But whether this new approach will make a serious impact on the company’s competitiveness remains to be seen.

• Toyota’s global sales take a hit in April as competition heats up in China.

• The most popular car colors aren’t what you would expect.

• Dangerous Takata airbags still in a lot of vehicles.

• Fisker layoffs continue as bankruptcy looms.

• Polestar takes massive hit on stock price amidst tough EV competition.

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move.

• Are you finance wizard? HGreg is looking for a Senior Controller in Miami to oversee finance operations at three Nissan Dealerships.

• Are you a performance-focused business analyst? Plug is looking to fill two Business Development roles in Los Angeles.

• Are you a salesperson at heart? OPENLANE has 10 roles for Market Sales Managers all over the country,

Looking to hire? Add your roles today—it’s 100% free.

Thanks for reading everyone.

— CDG