Podcast: ‘Weekly Wrap’ on AI adoption, affordability


Optimizing efficiency, improving accuracy and customer experience, and automating credit decisions are core uses of artificial intelligence in the auto finance industry as lenders look to grow their portfolios and manage risk.  

Auto lenders are working to balance the use of AI and machine learning to gain efficiency despite potential risks.  

Meanwhile, affordability remains a challenge for the industry as average transaction prices ticked up 2.2% sequentially in April and credit access worsened. The Dealertrack Credit Availability Index inched down 0.7% year over year to 93.8 in April.  

Originations industrywide dropped 1% YoY in Q4 2023 to $5.8 million amid affordability challenges and credit tightening.  

Still, the overall health of the auto finance industry in February and March was bolstered by strong vehicle sales, robust capital markets and lower auto finance application rejection rates.  

In this episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris and Associate Editors James Van Bramer and Ashley Savage discuss AI themes from Auto Finance Summit East 2024 and top news stories from the week ended May 17.  

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


Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.

Amanda Harris 0:25
Hello everyone and welcome to the roadmap from auto Finance News since 1996 and nations leading news on an automotive lending and leasing. And as Monday May 20th and Amanda here is joined by associate editors James Van Bramer and Ashley Savage, this is our weekly wrap. And what happened in auto finance for the week ending May 17th, 2024 and Economic news, the core consumer Price index, which excludes food and energy costs client .3% from March while the year over year measure reached the slowest pace in three years, retail sales stagnated in April amid high borrowing costs and mounting debt, opening the door for potential rate cuts this year. Although more measures are needed for the Fed to take action and compliance news, the US Supreme Court upheld the Consumer Financial Protection Bureau’s funding system, voting against claims that the Bureau was set up in violation of the constitutional provision that requires a congressional appropriation for government spending. That decision eases concerns that could have cast out on a dozen years of agency work and agency news. Chinese automaker Li Auto’s vehicle sales fell short of analyst expectations in the first quarter as the automaker cut its delivery target as demand was limited for its first battery electric model. Mega Van deliveries are targeted between 20 or 76,000 and 78,000 vehicles from an earlier goal of 100,000 to 130,000 units, and autofinance affordability remains a challenge for the industry as average transaction prices ticked up 2.2% sequentially in April and credit access worsened. The Dealertrack Credit availability index inched down .7% year over year to 93.8 in April.Originations industrywide also dropped about 1% year over year in Q 42023 to $5.8 million amid affordability challenges and credit tightening, according to the latest data from TransUnion. Still, the latest readings of auto finance news, Prioritary auto Finance Composite Index, which gauges the auto finance industry’s health by analyzing 8 weighted datasets, indicate that the industry as a whole remained on a positive trajectory in February and March, bolstered by strong vehicle sales, robust capital markets and lower auto finance application rejection rates, the index rose to 159.6 in March from 156.8 in February at 1.8% increase and the index climbed 37.5% from March 2023. Rejection rates fell to 1.5% in February, compared with 9.61% in January. In another tidbit from auto finance summit East, Chase Auto’s Leslie Wims Morris shared that the auto lender taps into the bank’s wider consumer base through ATMs, branches and digital channels to advertise private label deals for the lenders manufacturing partners, the banks, branches and ATMs then serve as a customer acquisition channel for private label, which makes up half of Chase Auto’s business. One of the other big themes of AFS E was a use of AI or artificial intelligence. James and Ashley wrote a great feature on this topic last week and they have the details. Ashley, wanna kick us off?
Ashley Savage 3:36
Yeah. Thanks, Amanda. If we took away one thing from auto finance E, it was that auto lenders are definitely employing AI and machine learning to improve overall efficiency across their operation. One example we saw with Bank of America’s use of technology to help streamline application approval and refinancing processes at AFS Bank of America’s. Tim Owens also shared how they’re using machine learning to sort incoming phone calls and emails which save time, which saves time by directing consumers to the right employee. Similarly, we heard from TD Auto Finance’s Andrew Stewart at the summit and he shared more on their use of technology to curate data and analytics for decision making. Stewart mentioned that tapping into technology, despite its potential risks, will allow the bank to reimagine its approach to pricing deal structuring interactions with dealers, and funding, which definitely joins a larger thing we heard from other speakers. GM Financial join this larger theme and expressing a desire to use technology and machine machine learning to boost revenue. Improve the customer experience and support overall efficiency.
Jim has already launched these efforts to their use of AI to summarize phone calls shared between CSR and customers, which is allowed the CSR’s to be more focused and engaged with consumers instead of worrying about simultaneously taking notes and navigating the conversation. OK, advances in technology, however, often come with risk, and I will hand it over to James now to talk more on how industry players are working through the risk to find the potential rewards that AI machine learning offer
James Van Bramer 4:53 Thank you so much, Ashley.
You know, there were so much that we still don’t know about AI, and yet it was the definitely dominated discussion at AFS East and one of those aspects was definitely automating credit decisions. Marcelo Brutti of Hyundai. He spoke really heavily into this, saying that he divested 30 to 40% of his time in in the use of artificial intelligence in his business well as well as Matt Dundas of Carvana, which is kind of already had a very digitally oriented business from the onset. One thing fascinating about what they had said was that they are actually trying to make their use of the technology more sophisticated. So it was very interesting to see how some businesses are.
Some lenders are kind of implementing the technology in their business, while others are kind of trying to make the technology that they’re already using more in a more sophisticated way. Another really fascinating thing about the technology discussion was that we have not really seen, we didn’t really hear any lenders to mentioned a a return on investment if the technology. So it really does seem to be uncertain whether the technology is going to increase business in any kind of way.Our profits in any kind of way, yet another really big. Another really great mention of how AI is kind of also dominating this space was said by, as Ash mentioned, TD Auto, TD Auto’s UH, Andrew Stewart, he said. There’s so much happening so quickly that you can’t do everything all at once. I feel like that was really one of the major takeaways with the discussions of an AI. Was that pretty much everyone’s kind of figuring out how they’re gonna? Well, everyone’s kind of already implementing it into their business. It’s really all about how can we get it to work and how fast they can we do that.There was also this really great mention at the at one of the roundtables at the summit where I, I don’t know if they would let me share their their name, but I’ll just say that they said something about how when the Internet started, we might have.
We all thought we would use it for our grocery list, right? Obviously, it’s quite well evolved from that. So I think that’s really a good way of thinking about how AI might kind of play into auto finance moving forward. Is that who? Who really knows? You know, but I think one major thing we saw was that I feel like most lenders would say that you kind of have to start thinking about it now
Amanda Harris 7:15 Definitely, definitely.That’s a great summary, James.
James Van Bramer 7:18 Which? Amanda Harris 7:18 You have to start thinking about it now for sure. Alright, well that does it for today’s episode. We will have a little bit more show coverage. We will have our spotlight feature from the main fire side to make sure to check out that out later this week. We also have another feature in the works all about compliance. Talk coming out of the show, so be sure to tune in to our site to keep the the rest of this updates, but that will do it. So today. Thank you for joining us on the road map and be sure to follow us on X and linked and we will see you online at autofinancenews.net and here next time.

Source : AutoFinanceNews