The auto lending divide, Oct. sales forecast, new car inventory surges

Hey, everyone. While everyone’s buzzing about Tesla’s Cybercab, Waymo is quietly owning the robotaxi game. 

With 25 million miles under its belt and over 100,000 rides a week, Waymo is the clear leader in the self-driving space. And the company’s pockets just got deeper after closing a $5.6B funding round to expand nationwide – putting it even further ahead of the competition.

—CDG

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Each week, I curate the top 5 automotive industry headlines based on the topics CDG readers engaged with the most on social media. Let’s get started.

1. Bank earnings expose a growing divide in auto lending

Auto lenders are taking different paths in Q3—Huntington Bank expanded lending through dealerships, while Ally and Wells Fargo scaled back to limit exposure to rising defaults. 

Why it matters: Borrowers, meanwhile, are in a bind. Many locked in loans during the pandemic’s car price surge, and with elevated interest rates, their monthly payments are eating up more of their budgets.

• 7.4% of buyers now pay over $1,000 a month, compared to just 4.3% in 2019, and 24% of borrowers owe more than their car is worth, per Edmunds.

• With limited options to refinance or trade down, many are stuck in loans they can’t afford.

Axcilla hits the nail on the head:

In fact, 8% of auto loan balances went delinquent in Q2, according to the New York Fed, marking a return to pre-pandemic levels.

Rising delinquencies, particularly in the subprime segment, are troubling for used car dealerships, which depend on subprime buyers to move inventory.

(Go deeper: 3 min. read)

Yet – some banks are finding creative ways to help bring down overall financing costs…

2. Santander launches digital banking in the U.S. to reduce auto loan costs

Santander’s launch of Openbank in the U.S. aims to tackle a critical challenge: lowering the cost of auto financing. 

• Currently, more than $30 billion of Santander’s $60 billion U.S. auto loan portfolio is funded through wholesale channels, which are expensive. 

• With Openbank, Santander plans to attract consumer deposits directly—replacing costly wholesale funding with lower-cost capital. 

• This shift would allow the bank to offer more competitive auto loan rates and improve profitability.

And the timing is key. Elevated interest rates and inflation have pushed many buyers to delay vehicle purchases, with Santander’s survey showing that over half of middle-income consumers postponed buying a car last year. However, 30% say they’d consider taking out a loan if rates drop.

By streamlining funding through Openbank, Santander is positioning itself to deliver lower-cost financing just as more consumers consider re-entering the market.

(Go deeper: 2 min. read)

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So naturally, I often hear this question:

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Interestingly – despite the challenging lending environment, new car sales are expected to rise in October…

3. Oct. car market balances higher sales with shrinking margins

Oct. new car sales are on track to hit 1.33 million units, up 2.1% from last year, with annualized sales (SAAR) projected at 16.1 million, reports J.D. Power.

After years of tight supply, inventory has jumped 25% to 1.9 million units, and cars are now sitting on lots for an average of 50 days — more than double last year’s average. With cars piling up, dealers are losing pricing power, so they'll need to sell more just to make up for the shrinking margins.

• Just 12.7% of vehicles are selling above MSRP, down from 27.1% a year ago. 

• Automakers are now offering bigger incentives, averaging $3,149 per vehicle—a 70% jump year-over-year—to get cars off the lot.

Bottom line: Automakers and dealers are caught between the need to move more inventory and the challenge of maintaining profitability.

Case in point:

(Go deeper: 3 min. read)

Leading some brands to make targeted price cuts…

4. Steep discounts from Stellantis as cars pile up

Overall, new car prices are down about 1.5% from Sept. 2023, though Stellantis brands — Jeep, Ram, Dodge, Chrysler, and Alfa Romeo—are seeing steeper drops, according to Cars Commerce marketplace data.

• Jeep prices are down 5%, Ram 7%, and Dodge 3%, driven by rising inventories and slower sales. 

• Stellantis vehicles now sit on dealer lots much longer than average, with Jeep at 124 days and Dodge at 181 days.

Zoom out: Inventory is stacking up across the market, up 30% from last year, and electric vehicles (EVs) are hanging around on lots a full two weeks longer than other cars.

Despite Stellantis dragging down averages, most automakers are holding the line on pricing. And on top of that Cars Commerce’s New Car Price Index shows affordability is improving, approaching mid-2022 levels.

(Go deeper: 4 min. read)

As Stellantis sorts out its pricing strategy, major production changes are also on the agenda.

5. Stellantis to build Ram 1500 pickup in Mexico despite outcry

Stellantis confirmed it will start building some Ram 1500 pickups in Mexico by 2025, despite pushback from the White House and the UAW to keep production in the U.S. 

Ram CEO Christine Feuell explained that the Saltillo plant in Mexico will serve as a “relief valve” for the Sterling Heights factory in Michigan, which will soon hit capacity as it takes on production of the Ram 1500 REV and Ramcharger.

But not everyone is convinced:

Between the lines: Though Feuell denied the move was aimed at cutting labor costs, Stellantis CEO Carlos Tavares has hinted otherwise, saying the company will shift sourcing to “best-cost countries” to stay competitive amid electrification.

The decision has sparked criticism, as workers were hoping the automaker would ramp up production at the nearby Warren Truck plant instead of outsourcing to Mexico, where 1,100 workers have already been laid off.

(Go deeper: 4 min. read)

We’ve got tons of great jobs hitting the CDG Job Board right now:

• Bayway Auto Group is searching for a Marketing Manager in Houston, TX.

• Ron Marhofer Auto Family needs a Hyundai Sales Consultant (and a few other positions) Ohio.

• Riverside Auto Group is on the hunt for a Controller located near Rome, GA.

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

That’s a wrap for now – make sure you’re following along on X, LinkedIn and IG for more real-time updates.

Thanks for reading. Hit reply and let me know if you found this week-in-review valuable or have any feedback. I’ll see you next weekend.

—CDG

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