Keep your eye on the ball – the fundamentals still drive the outlook in auto lending

There are two important factors driving our current auto sales and lending environment. First, we are at the end of a seven-year run of year-over-year growth, the first time that has happened since the 1920s. Second, vehicle leases are a growing segment of the overall new car sales. Both of these trends point to an increase in wholesale used car inventories, which may force manufacturers to offer additional incentives to boost new car sales.

Combine an expectation of amped-up incentive spending with a growing used car supply and what do you see? You see increased pressure on used car values driving the market over the next 2-3 years.

The growth of electric vehicles, ride-share companies, new lease and subscription models, and even autonomous vehicles are changes in the marketplace that have a potential impact over time, though not in the near-term. For now, the driving factors are still customer preference, incentive spending and supply, and the overall economy (including gas prices). For example:


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